UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 2, 2016.
or
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
.
Commission file number 001-16769
WEIGHT WATCHERS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of incorporation or organization)
11-6040273
(I.R.S. Employer Identification No.)
675 Avenue of the Americas, 6th Floor, New York, New York 10010
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code:
(212) 589-2700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, no par value
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ‘ No È
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes È No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).
Yes È No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ‘ Accelerated filer È
Non-accelerated filer ‘ (Do not check if a smaller reporting company)
Smaller reporting company ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ‘ No È
The aggregate market value of the registrant’s common stock held by non-affiliates as of July 2, 2015 (based upon the
closing price of $4.09 per share of common stock as of July 2, 2015, the last business day of the registrant’s second fiscal
quarter of 2015, as quoted on the New York Stock Exchange) was $112,751,513. For purposes of this computation, it is
assumed that shares of common stock held by our directors, executive officers and our controlling shareholders as of July 2,
2015 would be deemed stock held by affiliates.
The number of shares outstanding of common stock as of February 1, 2016 was 63,648,349.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for its 2016 annual meeting of shareholders are incorporated
herein by reference in Part III, Items 10-14. Such Proxy Statement will be filed with the SEC no later than 120 days after the
registrant’s fiscal year ended January 2, 2016.
Weight Watchers International, Inc.
Annual Report on Form 10-K
Table of Contents
Part I
Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Officers and Directors of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14.
Part IV
Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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i
BASIS OF PRESENTATION
Weight Watchers International, Inc. is a Virginia corporation with its principal executive offices in
New York, New York. In this Annual Report on Form 10-K unless the context indicates otherwise: “we,” “us,”
“our,” the “Company” and “WWI” refer to Weight Watchers International, Inc. and all of its operations
consolidated for purposes of its financial statements; “North America” refers to our North American Company-
owned operations; “United Kingdom” refers to our United Kingdom Company-owned operations; “Continental
Europe” refers to our Continental Europe Company-owned operations; and “Other” refers to Asia Pacific and
emerging markets operations and franchise revenues and related costs. Each of North America, United Kingdom,
Continental Europe and Other is also a reportable segment.
Our fiscal year ends on the Saturday closest to December 31st and consists of either 52- or 53-week periods.
In this Annual Report on Form 10-K:
•
•
•
•
•
•
•
•
“fiscal 2009” refers to our fiscal year ended January 2, 2010;
“fiscal 2010” refers to our fiscal year ended January 1, 2011;
“fiscal 2011” refers to our fiscal year ended December 31, 2011;
“fiscal 2012” refers to our fiscal year ended December 29, 2012;
“fiscal 2013” refers to our fiscal year ended December 28, 2013;
“fiscal 2014” refers to our fiscal year ended January 3, 2015 (included a 53rd week);
“fiscal 2015” refers to our fiscal year ended January 2, 2016; and
“fiscal 2016” refers to our fiscal year ended December 31, 2016.
The following terms used in this Annual Report on Form 10-K are our trademarks: Weight Watchers®,
PointsPlus®, ProPoints® and SmartPoints™.
ii
Item 1.
Business
Overview
PART I
We are a leading, global-branded consumer company and the world’s leading commercial provider of
weight management services, operating globally through a network of Company-owned and franchise operations.
With over five decades of weight management experience, expertise and know-how, we have established Weight
Watchers as one of the most recognized and trusted brand names among weight-conscious consumers. Weight
Watchers-branded products and services include meetings conducted by us and our franchisees, digital weight
management products provided through our websites, mobile sites and apps, products sold at meetings, licensed
products sold in retail channels and magazine subscriptions and other publications. Our primary sources of
revenue are subscriptions for our monthly commitment plans for Weight Watchers meetings and Online
subscriptions. Our “meetings” business refers to providing access to meetings to our monthly commitment plan
subscribers, “pay-as-you-go” members, Total Access subscribers and other meeting members. “Online” refers to
Weight Watchers Online, Weight Watchers OnlinePlus, Personal Coaching and other digital subscription
products.
Our brand enjoys high awareness and credibility among all types of weight-conscious consumers—women
and men, consumers online and offline, the support-inclined and the self-help-inclined. We are one of only a few
commercial weight management programs whose efficacy has been clinically proven repeatedly. As the number
of overweight and obese people worldwide grows, the demand for an effective, scalable and consumer-friendly
weight management program increases. We believe our global presence and brand awareness uniquely position
us in the global weight management market. We continue to explore different channels to access this market,
including through our at-work meetings and healthcare strategic initiatives.
We believe the unique value provided by our offerings is inspiration, accountability and support. In the
more than 50 years since our founding, we have built our meetings business by helping millions of people around
the world lose weight through sensible and sustainable food plans, activity, behavior modification and group
support. As of the end of fiscal 2015, we had approximately 1.0 million active meeting subscribers, who could
attend over 32,000 Weight Watchers meetings around the world, which were run by more than 9,000 leaders—
each of whom lost weight on our program. We also believe we are the leading global provider of paid digital
subscription weight management products. As of the end of fiscal 2015, we had approximately 1.4 million active
Online subscribers. Our Online business, together with its products, including apps for mobile and tablet devices,
has evolved over time. Our strong brand, together with the effectiveness of our plans, loyal customer base and
unparalleled network of service providers, are unique in the marketplace.
Business Organization and Global Operations
We have four reportable segments based on an integrated geographical structure as follows: North America,
United Kingdom, Continental Europe (CE) and Other. Each reportable segment provides similar products and
services. Further information regarding our reportable segments and our geographic areas can be found in Part II,
Item 7 of this Annual Report on Form 10-K under “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and in Part IV, Item 15 of this Annual Report on Form 10-K under Note 15
“Segment and Geographic Data” in the Notes to the Consolidated Financial Statements. Information concerning
some of the risks to which 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.
We operate in numerous countries around the world. Our “North America” reportable segment consists of
our United States and Canada Company-owned operations; our “United Kingdom” reportable segment consists
of our United Kingdom Company-owned operations; our “Continental Europe” reportable segment consists of
our Germany, Switzerland, France, Spain, Belgium, Netherlands and Sweden Company-owned operations; and
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our “Other” reportable segment consists of our Australia, New Zealand, Mexico and Brazil Company-owned
operations, as well as revenues and costs from our franchises in the United States and certain other countries.
Revenues from our North America, United Kingdom, Continental Europe, and Other reportable segments
contributed 64.9%, 10.7%, 19.7% and 4.7%, respectively, of our total revenues in fiscal 2015. Revenues from our
North America, United Kingdom, Continental Europe, and Other reportable segments contributed 64.0%, 10.6%,
20.2% and 5.2%, respectively, of our total revenues in fiscal 2014. Finally, revenues from our North America,
United Kingdom, Continental Europe, and Other reportable segments contributed 67.4%, 10.0%, 17.4% and
5.2%, respectively, of our total revenues in fiscal 2013.
The Global Weight Management Market
We participate in the global weight management market. According to Marketdata Enterprises, the weight
management market had revenue of approximately $59.8 billion in 2014 in the United States alone. The number
of overweight and obese adults around the world rose 27.5% between 1980 and 2013, and is estimated to reach
over 3 billion by 2030. Between 2011 and 2012, 69% of Americans at or over the age of 20 were considered
overweight and over a third of these were obese. Numerous diseases, including heart disease, high blood pressure
and Type II diabetes, are associated with being overweight or obese.
Our Services and Products
Our Weight Management Program and Plan
In each of our markets, we offer services and products that are built upon our new weight management
program, known as Beyond the Scale in North America. The program goes beyond a singular focus on weight
loss, encompassing a holistic approach to a healthier, more active, happier life. It is comprised of a range of
nutritional, activity, behavioral and lifestyle tools and approaches that can be personalized. Our new food plan,
known as SmartPoints, was developed from a combination of advancements in scientific research and consumer
insights, including from customers who experienced prior Weight Watchers plans. With the SmartPoints system,
each food has a SmartPoints value determined by the food’s calories, saturated fat, sugar and protein content.
Customers following the SmartPoints system can eat any food as long as the SmartPoints value of their total food
consumption stays within their personalized SmartPoints “budget”. Since nutritious foods generally have lower
SmartPoints values, this approach guides customers toward healthier eating patterns. Based on a personalized
assessment included in the Beyond the Scale program, members and subscribers get daily and weekly
SmartPoints targets, personalized activity goals and relevant content tailored to their needs. Prior to the launch of
SmartPoints in December 2015, we offered a weight management plan known as PointsPlus in North America,
or ProPoints in certain of our other geographies.
Our customers can participate in our program in two main ways: in-person group meetings and digitally.
Within these two channels, we offer a variety of products to meet each customer’s preferences. Our leaders,
when leading meetings and providing personal coaching, educate members and subscribers on our program and
range of tools. In addition to providing support, our leaders also inspire members and subscribers, as each leader
was successful in her or his weight loss journey using our methods.
Our Meetings Business
In our meetings business, we present our program in regular weekly meetings of 30 to 45 minutes in
duration, conveniently scheduled throughout the day. Our group support system remains the cornerstone of our
meetings. Members provide each other support by sharing their experiences with, and by providing
encouragement and empathy to, other people experiencing similar weight management challenges. Leaders
facilitate this support through interactive meetings that encourage learning through member-driven discussions
and individual goal-setting.
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The primary payment structure for our meetings business globally is through monthly commitment plans.
Under these plans, members generally receive unlimited access to meetings at a discounted monthly price plus
free access to certain Online and mobile tools and 24/7 Expert Chat, where available. Pursuant to these plans, a
fee is typically charged automatically to the member’s credit card or debit card on a monthly basis until the
member elects to cancel. As of the end of fiscal 2015, we had approximately 1.0 million active subscribers to our
monthly commitment plans. We also have a “pay-as-you-go” arrangement for the meetings business and, in some
countries, offer prepayment plans for meetings consisting of pre-paid meeting vouchers and coupons.
In fiscal 2015, we had total meeting attendance of approximately 31.8 million, which does not include
management’s estimate that franchised operations had total meeting attendance of over 3.8 million. Franchisees
typically pay us a fee equal to 10% of their meeting fee revenues. We have enjoyed a mutually beneficial
relationship with our franchisees over many years. In our early years, we used an aggressive franchising strategy
to quickly establish a meeting infrastructure to pre-empt competition. Since then, we have acquired a large
number of franchises. Our franchisees are responsible for operating classes in their franchise class territory using
the program and marketing guidelines we have developed. We provide a central support system for the program
and our brand. In many of our markets, franchisees purchase products from us at wholesale prices for resale
directly to members. Franchisees are obligated to adhere strictly to our program content guidelines, with the
freedom to control pricing, class locations, operational structure and local promotions. Franchisees provide local
operational expertise, advertising and public relations. Most franchise agreements are perpetual and can be
terminated only upon a material breach or bankruptcy of the franchisee.
Our Online Business
In our Online business, we offer various digital subscription products, including Weight Watchers
OnlinePlus and a weight management companion for Weight Watchers meetings members who want to digitally
manage the day-to-day aspects of their weight management plan. These products provide interactive and
personalized resources that allow users to follow our weight management plan via the Internet or on their mobile
device. In December 2014, we launched an Online subscription product, Personal Coaching, in certain of our
markets, including the United States. Personal Coaching offers one-on-one telephonic, e-mail and text support
and personalized planning from a Weight Watchers-certified Coach as well as access to other Online tools.
Our Online subscription products are based on the Weight Watchers approach to weight management and
provide additional tools to our meetings members, as applicable. They help subscribers adopt a healthier and
more active lifestyle, with a view toward long-term behavior modification—a key aspect of the Weight Watchers
approach toward sustainable weight loss. These products provide subscribers with online and mobile content,
functionality, resources and interactive mobile and web-based weight management plans. We believe our
personalized and interactive Online subscription products give subscribers an engaging weight management
experience. Our online community, which can be accessed via the web and the new Connect feature in our
mobile app, gives our subscribers a way to stay virtually connected, and support and motivate each other.
We believe that mobile weight management tools and resources are an important market opportunity for us.
Our mobile phone (iPhone® and Android™) and iPad® apps provide monthly commitment plan purchasers and
Online subscribers with access to a suite of weight-loss tools, such as recipe and tracking tools, as well as other
helpful content and the ability to scan the barcodes of food products for their SmartPoints values. We are
continuing to improve the capabilities of our products, including integrating with popular activity-
tracking devices and wireless weight scales.
Our Product Sales
We sell a range of products, including bars, snacks, cookbooks, food and restaurant guides with SmartPoints
values, Weight Watchers magazines, SmartPoints calculators and fitness kits, and certain third-party products,
such as activity-tracking monitors. These products complement our weight management program and help our
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customers in their weight management efforts. We have focused on selling products that drive recurring
purchases. Our products are designed to be high quality, offer benefits related to the Weight Watchers program
and be easy to merchandise.
We sell our products through our meetings business, online and to our franchisees. Excluding sales to or by
our franchisees, in fiscal 2015, sales of proprietary products in our meetings business and online represented
approximately 11.3% of our revenues. We seek to grow our product sales per attendee in our meetings business
by continuing to optimize our product offerings by updating existing products, selectively introducing new
products and sharing best practices across geographies. In fiscal 2015, we launched our ecommerce platform at
shop.weightwatchers.com, making the site available to all consumers, including non-members and non-
subscribers.
Licensing and Endorsements
We license the Weight Watchers brand and our other intellectual property in certain categories of food,
including frozen foods and baked goods, among others, and other relevant consumer products, including scales.
We also endorse carefully selected branded consumer products. By partnering with carefully selected companies
in categories relevant and helpful to weight-conscious consumers, we have created a highly profitable licensing
business as well as a powerful vehicle to reinforce the Weight Watchers brand in the minds of our target
consumers.
We typically partner in our licensing and endorsement arrangements with third parties that 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 acquisition from the H.J. Heinz
Company, or Heinz, in September 1999, Heinz received a perpetual royalty-free license to continue using our
brand in its core food categories. We plan to continue to choose our licensing and endorsement partners carefully
after identifying and prioritizing product categories that enhance the Weight Watchers brand and have long-term
growth potential.
Our licensing and endorsement arrangements give us access to weight-conscious consumers through
products sold at retail and increase the awareness of our brand. We continue to believe there are significant
opportunities both in the United States and internationally to take advantage of the strength of the Weight
Watchers brand and our other intellectual property through additional licensing and endorsement arrangements.
Publishing
Weight Watchers magazines are published in most of our major markets. In the United States, Weight
Watchers Magazine is an important branded marketing platform that continues to show strong circulation and
advertiser acceptance. As of fall 2015, our US magazine had a readership of over seven million, according to
GfK Mediamark Research and Intelligence, LLC, an industry tracking service. We also issue other publications,
such as cookbooks and food and restaurant guides with SmartPoints values, which complement our program.
At-Work Meetings and Healthcare
As healthcare costs continue to be a significant concern on the minds of employers and their employees, we
believe that our broad range of services and products uniquely positions us to serve the corporate market and help
companies reduce their healthcare costs and improve the overall well-being of their employees. Our strategy is
focused on leveraging our organizational capability to serve companies of every size and type by offering
convenient and flexible weight-loss solutions that include meetings at the workplace, local community meetings
and access to Weight Watchers Online.
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We believe the healthcare market represents an important channel to reach new consumers. At the end of
fiscal 2014, we announced a strategic initiative with Humana, Inc. to offer our weight management services as a
part of coverage under certain employer-sponsored health plans. We continue to explore different approaches to
this market.
Our Clinical Efficacy and Reputation in the Marketplace
Weight Watchers is one of the most clinically-studied commercial weight management programs, with
dozens of peer-reviewed publications in the last 20 years. For example, in 2013, a randomized controlled trial
conducted by the Baylor College of Medicine researchers and funded by us was published in The American
Journal of Medicine and found that overweight and obese adults following Weight Watchers lost significantly
more weight at six months than those who tried to lose weight on their own. Our efficacy and the value of our
offerings are also well-acknowledged in the marketplace. For instance, in 2016, we again were recognized by
U.S. News & World Report in the “2016 Best Diets” rankings. We ranked #1 for “Best Weight-Loss Diet” and
tied for #1 for “Best Commercial Diet Plan” and “Easiest Diet to Follow.”
Marketing and Promotion
Our communications with consumers and other promotional efforts enhance our brand image and
awareness, and motivate both former and potential new customers to join Weight Watchers meetings or purchase
our Online products. We also recently entered into a Strategic Collaboration Agreement with Oprah Winfrey,
pursuant to which, among other things, Ms. Winfrey provides us with services in her discretion to promote the
Company and our programs, products and services, including in advertisements and promotions, and making
personal appearances on our behalf. The announcement of our partnership with Ms. Winfrey led to more than one
billion earned media impressions. Further information on this agreement and our partnership with Ms. Winfrey
can be found below under “—History—Winfrey Transaction.”
We advertise primarily in national media vehicles (television, digital, print, radio, etc.), which are selected
based on their efficiency and effectiveness in reaching our target audience. We develop and maintain a high level
of engagement with new and potential customers on various social platforms including Facebook and Twitter.
While our traditional advertising schedule generally supports the three key marketing campaigns of the year,
winter, spring and fall, we communicate with consumers in the Online space in real time throughout the year.
Also, we utilize brand ambassadors, including from time to time celebrity spokespersons, as part of our
advertising.
In addition to the above advertising channels, we take advantage of other channels for which we are
uniquely positioned given our long history and network of leaders, members and subscribers. The word of mouth
generated by our current and former customers is an important source of new customers. These referrals,
combined with our strong brand and known effectiveness, enable us to attract new and returning customers. We
also carry out many of our key public relations initiatives through the efforts of current and former Weight
Watchers leaders, members and subscribers, including from time to time celebrities.
Additionally, Weight Watchers Magazine reinforces the value of our brand and serves as an important
marketing tool to both existing and potential customers. We also utilize mailing campaigns and the
WeightWatchers.com website to attract new and returning customers and to engage current customers.
Seasonality
Our business is seasonal due to the importance of the winter season to our overall recruitment environment.
Our advertising schedule generally supports the three key recruitment-generating seasons of the year: winter,
spring and fall, with winter having the highest concentration of advertising spending.
5
Competition
The weight management industry includes commercial weight management programs; Internet, free mobile
and other weight management apps and other electronic weight management approaches; surgical procedures; the
pharmaceutical industry; self-help weight management regimens and other self-help weight management
products, services and publications, such as books, magazines, websites and social media groups; dietary
supplements and meal replacement products; healthy lifestyle services, products and publications; weight
management services administered by doctors, nutritionists and dieticians; government agencies and non-profit
groups that offer weight management services; fitness centers and national drug store chains.
Competition among commercial weight management programs is largely based on program recognition and
reputation and the effectiveness, safety and price of the program. In the United States, we compete with several
other companies in the commercial weight management industry, although we believe that their businesses are
not comparable to ours. For example, many of these competitors’ businesses are based on the sale of pre-
packaged meals and meal replacements. Our meetings use group support, interactive, member-driven discussions
to encourage learning and behavior modification to help our members move towards a healthier, more active,
happier life with healthier eating patterns, in conjunction with a flexible food plan that allows members the
freedom to choose what they eat. There are no significant group education-based competitors in any of our major
markets, except in the United Kingdom.
We believe that food manufacturers that produce meal replacement products are not comparable
competition because these businesses’ meal replacement products do not engender behavior modification through
education in conjunction with a flexible, healthy food plan.
We also compete with various self-help diets, products, services and publications, such as free mobile and
other weight management apps. Further information regarding our competition can be found in Part II, Item 7 of
this Annual Report on Form 10-K under “Management’s Discussion and Analysis of Financial Condition and
Results of Operations.”
Trademarks, Patents and Other Proprietary Rights
We own numerous domestic and international trademarks, patents and other proprietary rights that are
valuable assets and are important to our business. Depending upon the jurisdiction, trademarks are valid as long
as they are used in the regular course of trade and/or their registrations are properly maintained. Patent protection
extends for varying periods according to the date of patent filing or grant and the legal term of patents in the
jurisdiction in which the patent is granted. The actual protection afforded by a patent may vary from country to
country depending upon the type of patent, the scope of its coverage and the availability of legal remedies in the
country. We believe the protection of our trademarks, copyrights, patents, domain names, trade dress and trade
secrets is important to our success. We aggressively protect our intellectual property rights by relying on a
combination of trademark, copyright, patent, trade dress, trade secret and other intellectual property laws, and
through domain name dispute resolution systems.
History
Early Development
In 1961, Jean Nidetch, our founder, attended a New York City obesity clinic and took what she learned from
her personal experience at the obesity clinic and began weight-loss meetings with a group of her overweight
friends in the basement of a New York apartment building. Under Ms. Nidetch’s leadership, the group members
supported each other in their weight-loss efforts, and word of the group’s success quickly spread. Ms. Nidetch
and Al and Felice Lippert, 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.
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Artal Ownership
In September 1999, Artal Luxembourg S.A., or Artal Luxembourg, acquired us from Heinz. Artal
Luxembourg is an indirect subsidiary of Artal Group S.A., or Artal Group, which together with its parents and its
subsidiaries is referred to in this Annual Report on Form 10-K as Artal. Currently, Artal Luxembourg is the
record holder of all our shares owned by Artal.
WeightWatchers.com Acquisition
In July 2005, we acquired control of our licensee and affiliate, WeightWatchers.com, Inc., by increasing our
ownership interest from approximately 20% to approximately 53%. Subsequently, in December 2005,
WeightWatchers.com, Inc. redeemed all shares owned by Artal in it, resulting in our current ownership of 100%
of WeightWatchers.com, Inc.
Winfrey Transaction
On October 18, 2015, we entered into a Strategic Collaboration Agreement with Ms. Winfrey, or the
Strategic Collaboration Agreement, pursuant to which Ms. Winfrey granted us the right to use, subject to her
approval, her name, image, likeness and endorsement for and in connection with the Company and its programs,
products and services (including in advertising, promotion, materials and content), and we granted Ms. Winfrey
the right to use our WEIGHT WATCHERS marks to collaborate with and promote the Company and its
programs, products and services. The Strategic Collaboration Agreement has an initial term of five years, with
additional successive one year renewal terms. During this period, Ms. Winfrey will consult with us and
participate in developing, planning, executing and enhancing the Weight Watchers program and related
initiatives, and provide us with services in her discretion to promote the Company and its programs, products and
services, including in advertisements and promotions, and making personal appearances on our behalf.
Ms. Winfrey will not grant anyone but the Company the right to use her name, image, likeness or endorsement
for or in connection with any other weight loss or weight management programs during the term of the Strategic
Collaboration Agreement, and she will not engage in any other weight loss or weight management business,
program, products, or services during the term of the Strategic Collaboration Agreement and for one year
thereafter.
On that same date, we entered into a Share Purchase Agreement with Ms. Winfrey, or the Winfrey Purchase
Agreement, pursuant to which we issued and sold to Ms. Winfrey an aggregate of 6,362,103 shares of our
common stock for an aggregate cash purchase price of $43,198,679. The purchased shares are subject to certain
transfer restrictions and a right of first offer and right of first refusal held by the Company. Under the Winfrey
Purchase Agreement, Ms. Winfrey has certain demand registration rights and piggyback rights with respect to
these purchased shares. The Winfrey Purchase Agreement also provides Ms. Winfrey with the right to be
nominated as director of the Company for so long as she and certain permitted transferees own at least 3% of our
issued and outstanding common stock.
In consideration of Ms. Winfrey entering into the Strategic Collaboration Agreement and the performance
of her obligations thereunder, on October 18, 2015, we granted Ms. Winfrey a fully vested option to purchase
3,513,468 shares of our common stock, or the Winfrey Option. The term sheet for the Winfrey Option, which
includes the terms and conditions appended thereto, relating to the grant of the Winfrey Option is referred to
herein as the Winfrey Option Agreement. The Winfrey Option is exercisable at a price of $6.97 per share, in
whole or in part, at any time prior to October 18, 2025, subject to earlier termination under certain circumstances,
including if (i) the Strategic Collaboration Agreement expires as a result of Ms. Winfrey’s decision not to renew
the term of such agreement and (ii) a change in control (as defined the Winfrey Option Agreement) of the
Company occurs. The shares issuable upon exercise of the Winfrey Option are subject to certain transfer
restrictions and a right of first offer and right of first refusal held by the Company.
7
In connection with Ms. Winfrey’s purchase of our common stock and the grant of the Winfrey Option
described above, Artal Luxembourg entered into a Voting Agreement with Ms. Winfrey on October 18, 2015, or
the Voting Agreement, pursuant to which Ms. Winfrey agreed to vote all of her common stock or preferred stock
of the Company and other securities convertible into or exercisable or exchangeable for any common stock or
preferred stock of the Company so as to elect such individuals designated by Artal. The Voting Agreement
terminates on the date that any of the following occurs: (i) Artal (and certain permitted transferees) and
Ms. Winfrey (and certain permitted transferees) collectively own less than 50% of our issued and outstanding
common stock, (ii) Ms. Winfrey then has the right to be nominated as a director and has met certain eligibility
requirements under the Winfrey Purchase Agreement, but is not elected as a director of the Company,
(iii) Ms. Winfrey (and certain permitted transferees) collectively own less than 1% of our issued and outstanding
common stock, (iv) the voting and related arrangements in the Voting Agreement, in our reasonable
determination, constitutes a “change of control” in any of our debt agreements or (v) the parties to the Voting
Agreement terminate such agreement by written consent.
As a result of entering into the Voting Agreement, Artal and Ms. Winfrey are acting as a “group” within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. As a result, we continue to qualify as a “controlled company” under the applicable rules of The
New York Stock Exchange, or the NYSE.
The transactions contemplated by the Strategic Collaboration Agreement, Winfrey Purchase Agreement and
Winfrey Option Agreement are collectively referred to herein as the Winfrey Transaction.
Regulation
A number of laws and regulations govern our advertising, services, products, operations and relations with
consumers, licensees, franchisees, employees and other service providers and government authorities in the
countries in which we operate. Certain federal, state and foreign agencies, such as the Federal Trade
Commission, or FTC, and the Food and Drug Administration, or FDA, regulate and enforce such laws and
regulations relating to advertising, promotions, packaging, privacy, consumer pricing and billing arrangements
and other consumer protection matters. We are subject to many distinct employment, labor, commercial, benefits
and tax laws and regulations in each country in which we operate, including regulations affecting our
employment and wage and hour practices and our relations with our employees and service providers. Laws and
regulations directly applicable to communications, operations or commerce over the Internet such as those
governing intellectual property, privacy and taxation, are more prevalent and continue to evolve. Our operations
are subject to these laws and regulations and we continue to monitor their development and our compliance. In
addition, we are subject to other laws and regulations in the United States and internationally.
During the mid-1990s, the FTC filed complaints against a number of commercial weight management
providers alleging violations of federal law in connection with the use of advertisements that featured
testimonials, claims for program success and program costs. In 1997, we entered into a consent order with the
FTC settling all contested issues raised in the complaint filed against us. The consent order requires us to comply
with certain procedures and disclosures in connection with our advertisements of services and products. From
time to time, we have been in discussions with the FTC regarding such consent order.
Employees and Service Providers
As of January 2, 2016, we had approximately 19,000 employees, a majority of whom were part-time
employees. In addition, in certain of our markets, our service providers are self-employed and are not included in
this total. We consider our relations with our employees and service providers to be satisfactory.
8
Available Information
Corporate information and our press releases, Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K, and amendments thereto, are available free of charge on our
website at www.weightwatchersinternational.com as soon as reasonably practicable after such material is
electronically filed with or furnished to the Securities and Exchange Commission (i.e., generally the same day as
the filing). Moreover, we also make available at that site the Section 16 reports filed electronically by our
officers, directors and 10 percent shareholders. Usually these are publicly accessible no later than the business
day following the filing.
We use our website at www.weightwatchersinternational.com, our corporate Facebook page
(www.facebook.com/weightwatchers), Twitter account (@WeightWatchers), and Instagram account
(Instagram.com/weightwatchers) as channels of distribution of Company information. The information we post
through these channels may be deemed material. Accordingly, investors should monitor these channels, in
addition to following our press releases, SEC filings and public conference calls and webcasts. The contents of
our website and social media channels shall not be deemed to be incorporated herein by reference.
Our Amended and Restated Code of Business Conduct and Ethics, or the Code of Business Conduct and
Ethics, and our Corporate Governance Guidelines are also available on our website at
www.weightwatchersinternational.com.
9
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, this Annual Report on Form 10-K includes “forward-
looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including, in particular,
the statements about our plans, strategies and prospects 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-K and the documents incorporated by reference herein to identify forward-
looking statements. We have based these forward-looking statements on our current views with respect to future
events and financial performance. Actual results could differ materially from those projected in these forward-
looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions,
including, among other things:
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competition from other weight management industry participants or the development of more effective
or more favorably perceived weight management methods;
our ability to continue to develop new, innovative services and products and enhance our existing
services and products or the failure of our services and products to continue to appeal to the market, or
our ability to successfully expand into new channels of distribution or respond to consumer trends;
the ability to successfully implement new strategic initiatives;
the effectiveness of our advertising and marketing programs, including the strength of our social media
presence;
the impact on the Weight Watchers brand of actions taken by our franchisees, licensees, suppliers and
other partners;
the impact of our debt service obligations and restrictive debt covenants;
the inability to refinance our debt obligations on favorable terms or at all;
uncertainties regarding the satisfactory operation of our information technology or systems;
the impact of security breaches or privacy concerns;
the recognition of asset impairment charges;
the loss of key personnel or consultants or failure to effectively manage and motivate our workforce;
the inability to renew certain of our licenses, or the inability to do so on terms that are favorable to us;
the expiration or early termination by us of leases;
risks and uncertainties associated with our international operations, including regulatory, economic,
political and social risks and foreign currency risks;
uncertainties related to a downturn in general economic conditions or consumer confidence;
our ability to successfully make acquisitions or enter into joint ventures, including our ability to
successfully integrate, operate or realize the anticipated benefits of such businesses;
the seasonal nature of our business;
the impact of events that discourage or impede people from gathering with others or accessing
resources;
our ability to enforce our intellectual property rights both domestically and internationally, as well as
the impact of our involvement in any claims related to intellectual property rights;
the outcomes of litigation or regulatory actions;
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the impact of existing and future laws and regulations;
our failure to maintain effective internal control over financial reporting;
the possibility that the interests of Artal, who effectively controls us, will conflict with other holders of
our common stock; and
other risks and uncertainties, including those detailed from time to time in our periodic reports filed
with the Securities and Exchange Commission.
You should not put undue reliance on any forward-looking statements. You should understand that many
important factors, including those discussed under the headings “Risk Factors” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations,” could cause our results to differ materially from
those expressed or suggested in any forward-looking statement. Except as required by law, we do not undertake
any obligation to update or revise these forward-looking statements to reflect new information or events or
circumstances that occur after the date of this Annual Report on Form 10-K or to reflect the occurrence of
unanticipated events or otherwise.
11
Item 1A. Risk Factors
You should consider carefully, in addition to the other information contained in this Annual Report on
Form 10-K and the exhibits hereto, the following risk factors in evaluating our business. Our business, financial
condition or results of operations could be materially adversely affected by any of these risks. The following
discussion of risks is not all inclusive but is designed to highlight what we believe are the most significant risks
that we face. Additional risks and uncertainties, not presently known to us or that we currently deem immaterial,
may also impair our business, financial condition or results of operations.
Competition from other weight management industry participants or the development of more effective or
more favorably perceived weight management methods could result in decreased demand for our services
and products.
The weight management industry is highly competitive. We compete against a wide range of providers of
weight management services and products. Our competitors include: commercial weight management programs;
Internet, free mobile and other weight management apps and other electronic weight management approaches;
surgical procedures; the pharmaceutical industry; self-help weight management regimens and other self-help
weight management products, services and publications, such as books, magazines, websites and social media
groups; dietary supplements and meal replacement products; healthy lifestyle services, products and publications;
weight management services administered by doctors, nutritionists and dieticians; government agencies and non-
profit groups that offer weight management services; fitness centers and national drug store chains. Additional
competitors may emerge as new or different services, products or methods of weight management are developed
and marketed. More effective or more favorably perceived diet and weight management methods, including
pharmaceutical treatments, fat and sugar substitutes or other technological and scientific advancements in weight
management methods, also may be developed. This competition may reduce demand for our services and
products.
The purchasing decisions of weight management consumers are highly subjective and can be influenced by
many factors, such as brand image, marketing programs, cost, consumer trends and perception of the efficacy of
the service and product offerings. Moreover, consumers can, and frequently do, change weight management
approaches easily and at little cost. For example, fad diets and weight loss trends, such as low-carbohydrate diets,
have adversely affected our revenues from time to time. More recently, our revenue was adversely affected by
the popularity of mobile technology, which has led to increased trial of free mobile and other weight
management apps and activity monitors. Any decrease in demand for our services and products may adversely
affect our business, financial condition or results of operations.
If we do not continue to develop new, innovative services and products or if our services and products do
not continue to appeal to the market, or if we are unable to successfully expand into new channels of
distribution or respond to consumer trends, our business may suffer.
The weight management industry is subject to changing consumer demands based, in large part, on the
efficacy and popular appeal of weight management programs. The popularity of weight management programs is
dependent, in part, on their ease of use, cost and channels of distribution as well as consumer trends. For
example, the increasing focus of consumers on more integrated lifestyle and fitness approaches rather than just
food, nutrition and diet could adversely impact the popularity of our programs. Our future success depends on
our ability to continue to develop and market new, innovative services and products and to enhance our existing
services and products, each on a timely basis, to respond to new and evolving consumer demands, achieve
market acceptance and keep pace with new nutritional, weight management, technological and other
developments. We may not be successful in developing, introducing on a timely basis or marketing any new or
enhanced services and products. Additionally, new or enhanced services or products may not appeal to the
market or the market’s perception of us may not evolve alongside our services and products. Our future success
also will depend, in part, on our ability to successfully distribute our services and products through appealing
12
channels of distribution, such as mobile or social media. Our failure to develop new, innovative services and
products and to enhance our existing services and products, the failure of our services and products to continue to
appeal to the market or the failure to expand into appealing new channels of distribution could have an adverse
impact on our ability to attract and retain members and subscribers and thus adversely affect our business,
financial condition or results of operations.
We may not be able to successfully implement new strategic initiatives, which could adversely impact our
business.
We are continuously evaluating changing consumer preferences and the competitive environment of our
industry and seeking out opportunities to improve our performance through the implementation of selected
strategic initiatives, such as our healthcare initiative. The goal of these efforts is to develop and implement a
comprehensive and competitive business strategy which addresses the continuing changes in the weight
management industry environment and our position within the industry. For example, as the healthcare industry
continues to evolve its response to the obesity epidemic so do the requirements, both regulatory and business, for
providers. If we do not successfully meet these requirements, we may not be perceived as an appropriate partner
for certain purposes. We may not be able to successfully implement our strategic initiatives and realize the
intended business opportunities, growth prospects, including new business channels, and competitive advantages.
Our efforts to capitalize on business opportunities may not bring the intended results. Assumptions underlying
expected financial results or consumer demand may not be met or economic conditions may deteriorate. We also
may be unable to attract and retain highly qualified and skilled personnel to implement our strategic initiatives. If
these or other factors limit our ability to successfully execute our strategic initiatives, our business activities,
financial condition or results of operations may be adversely affected.
Our business depends on the effectiveness of our advertising and marketing programs, including the
strength of our social media presence, to attract and retain members and subscribers.
Our business success depends on our ability to attract and retain members to our meetings and subscribers to
our Online products. Our ability to attract and retain members and subscribers depends significantly on the
effectiveness of our advertising and marketing practices. From time to time, we use the success stories of our
members and subscribers, including in some cases celebrities, in our advertising and marketing programs to
communicate on a personal level with consumers. Actions taken by these members, subscribers and celebrities
that harm their personal reputation, or include the cessation of using our services and products, could have an
adverse impact on the advertising and marketing campaigns in which they are featured. We also use social media
channels as a means of communicating with consumers. Unauthorized or inappropriate use of these channels
could result in harmful publicity or negative consumer experience which could have an adverse impact on the
effectiveness of our marketing in these channels. In addition, substantial negative commentary by others on
social media platforms could have an adverse impact on our reputation and ability to attract and retain members
and subscribers. If our advertising and marketing campaigns do not generate a sufficient number of members and
subscribers, our business, financial condition and results of operations will be adversely affected.
The Weight Watchers brand could be impaired due to actions taken by our franchisees, licensees,
suppliers and other partners.
We believe that the Weight Watchers brand, including its widespread recognition and strong reputation in
the market, is one of our most valuable assets and that it provides us with a competitive advantage. Our
franchisees 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,
and also endorse third-party branded consumer products. We also sell in our meeting rooms food and non-food
products manufactured by third-party suppliers. Our franchisees, licensees, suppliers and other partners are
independent third parties with their own financial objectives. Actions taken by them, including violations of
generally accepted ethical business practices or breaches of law or contractual obligations, such as not following
13
our program or not maintaining our quality and safety standards, could harm our brand. Also, Weight Watchers
products may be subject to product recalls, litigation or other deficiencies. Any negative publicity associated with
these actions or these third parties would adversely affect our brand and may result in decreased meeting
attendance, Online product subscriptions and product sales and, as a result, lower revenues and profits.
Our debt service obligations could adversely affect our financial condition, and the restrictions of our debt
covenants could impede our operations and flexibility.
As of January 2, 2016, our total debt was $2,235.0 million. In addition, at January 2, 2016, we had
$0.2 million available under our revolving credit facility. Our debt consists entirely of variable-rate instruments
so we are subject to the risk of higher interest rates. We seek to manage our exposure to interest rates through
interest rate swaps. At the end of fiscal 2015, we had in effect an interest rate swap with a notional amount of
$1.5 billion.
While there is no net debt to EBITDA (earnings before interest, taxes, depreciation and amortization)
leverage ratio maintenance requirement on our $2,235.0 million of debt outstanding, 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 and enter into consolidations, mergers and transfers of all or substantially all of our assets. A breach of any
of these covenants could result in an event of default under the credit facilities. Under the terms of our credit
facilities, depending on our leverage ratio, we are obligated to offer to prepay our term loan facilities in an
aggregate amount determined by our excess cash flow. If an event of default exists under the credit facilities, the
lenders could elect to cease making loans and declare all amounts outstanding thereunder to be immediately due
and payable. If the lenders under the credit facilities accelerate the payment of the indebtedness, we may not be
able to refinance such indebtedness, and our assets may not be sufficient to repay in full that indebtedness and
our other indebtedness that would become due as a result of any such acceleration.
We may not be able to refinance our debt on favorable terms or at all depending on the condition of the
capital markets and our financial condition at such time.
Our ability to make scheduled payments on or to refinance our debt obligations and to fund our planned
capital expenditures and other ongoing liquidity needs depends on our future performance, which may be
affected by financial, business, economic, demographic and other factors, such as attitudes toward weight
management and pressure from our competitors. We have a term loan credit facility with a $144.3 million debt
maturity obligation due April 2016. We expect to satisfy our debt obligations with respect to this April 2016
maturity with cash on hand.
We also have a term loan credit facility in an aggregate principal amount of $2.1 billion that will mature in
April 2020. We expect to pay the principal and interest due in April 2020 from a combination of our cash flows
provided by operating activities and by opportunistically using other means to repay or refinance our obligations
as we determine appropriate. There can be no assurance that we will maintain a level of cash flows provided by
operating activities in an amount sufficient to permit us to pay the principal and interest on all of our outstanding
debt. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be
forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or
restructure or refinance our indebtedness. Our ability, if any, to restructure or refinance our debt will depend on
the condition of the capital markets and our financial condition at such time. We also may not be able to secure
future borrowings under our WWI Credit Facility (as defined below) or otherwise to fund our planned capital
expenditures and other ongoing liquidity needs.
Any refinancing, if available on acceptable terms or at all, of our debt could be at higher interest rates and
may require us to comply with more onerous covenants, which could further restrict our business operations. The
terms of existing or future debt instruments may restrict us from adopting some of these alternatives. In addition,
14
any deterioration in our performance would likely result in a reduction of our credit rating, which could harm our
ability to incur additional indebtedness or the ability to refinance our debt obligations on favorable terms or at all.
Any failure of our technology or systems to perform satisfactorily could result in an adverse impact on our
business.
We rely on software, hardware, network systems and similar technology, including cloud-based technology,
that is either developed by us or licensed from or maintained by third parties to operate our websites, Online
subscription product offerings and other services and products such as the recurring billing system associated
with certain of our commitment plans, and to support our business operations. As much of this technology is
complex, there may be future errors, defects or performance problems, including when we update our technology
or integrate new technology to expand and enhance our capabilities. Our technology may malfunction or suffer
from defects that become apparent only after extended use. In addition, our operations depend on our ability to
protect our information technology systems against damage from fire, power loss, water, earthquakes,
telecommunications failures, third-party cyber-attacks and similar unexpected adverse events. Interruptions in
our websites, services and products or network systems could result from unknown technical defects, insufficient
capacity or the failure of our third party providers to provide continuous and uninterrupted service. While we
maintain disaster recovery capabilities to return to normal operation in a timely manner, we do not have a fully
redundant system that includes an instantaneous recovery capability.
As a result of such possible defects, failures, interruptions or other problems, our services and products
could be rendered unreliable or be perceived as unreliable by customers, which could result in harm to our
reputation and brand. Any failure of our technology or systems could result in an adverse impact on our business.
Our reputation and the appeal of our services and product offerings may be harmed by security breaches
or privacy concerns.
Breaches of security, vandalism and other malicious acts, which are increasingly negatively impacting
companies, could result in unauthorized access to proprietary or customer information or data, including credit
card transaction data, or cause interruptions to our services and products. Such unauthorized access could harm
our reputation, expose us to liability claims and may result in the loss of existing or potential customers. We rely
upon sophisticated information technology systems to operate our business. In the ordinary course of business,
we collect, store and utilize confidential information (including, but not limited to, personal customer
information and data), and it is critical that we do so in a secure manner to maintain the confidentiality and
integrity of such confidential information as well as comply with applicable regulatory requirements and
contractual obligations.
We also have outsourced significant elements of our information technology infrastructure and, as a result,
we are managing many independent vendor relationships with third parties who may or could have access to our
confidential information. The size and complexity of our information technology and information security
systems, and those of our third-party vendors with whom we contract, make such systems potentially vulnerable
to security breaches. While we have invested and developed systems and processes designed to protect such
proprietary or customer information or data, there can be no assurance that our efforts will prevent service
interruptions or security breaches.
Most states require that customers be notified if a security breach results in the disclosure of their personal
financial account or other information, and additional states and governmental entities are considering such laws.
In addition, other public disclosure laws may require that material security breaches be reported. If we experience
a security breach and such notice or public disclosure is required in the future, our reputation and our business
may be harmed. Prospective and existing customers, as well as companies and health plan providers who we
currently or may in the future partner with, may have concerns regarding our use of private information or data
collected on our websites or through our services and products, such as weight management information,
15
financial data, email addresses and home addresses. These privacy concerns could keep customers from using our
websites or purchasing our services or products, and third parties from partnering with us.
In addition, the transmission of computer viruses, or similar malware, could adversely affect our
information technology systems and harm our business operations. As a result, it may become necessary to
expend significant additional amounts of capital and other resources to protect against, or to alleviate, problems
caused by security breaches. These expenditures, however, may not prove to be a sufficient remedy.
We may be required to recognize asset impairment charges for indefinite- and definite-lived assets.
In accordance with GAAP (as defined hereafter), we perform impairment reviews of our indefinite-lived
assets, which include franchise rights acquired and goodwill, on at least an annual basis or more often if events
so require. We also continually evaluate whether current factors or indicators, such as the deterioration in
relevant, country macroeconomic conditions, an increased competitive environment, a decline in our financial
performance, and/or other prevailing conditions in the capital markets, require the performance of an interim
impairment assessment of those assets. The process of testing franchise rights acquired, goodwill and other
indefinite-lived assets for impairment involves numerous judgments, assumptions and estimates made by
management which inherently reflect a high degree of uncertainty. Certain factors, including the future
profitability of our businesses, the price of our stock and macroeconomic conditions (both at the global and local
levels), might have a negative impact on the fair value of these assets. In fiscal 2013, we recorded impairment
charges in the aggregate of approximately $1.2 million related to franchise rights acquired in connection with our
Mexico and Hong Kong operations. We may incur additional impairment charges in the future, which would
have an adverse impact on our financial condition and results of operations.
Additionally, we evaluate definite-lived assets, both tangible, which includes our physical plant and
equipment, and intangible, which includes both internally developed and purchased software, for impairment by
comparing the net realizable value of the asset to the carrying value of the capitalized cost. If the value of those
assets is not deemed to be recoverable, an assessment of the fair value of those assets is performed and to the
extent the carrying value exceeds the fair value an impairment charge is recognized. Should our investment in
capitalized definite-lived assets become impaired, there would also be an adverse impact on our reported
financial results.
Loss of key personnel or consultants or failure to effectively manage and motivate our workforce could
negatively impact our sales of services and products, business, financial condition and results of
operations.
We depend on senior management and other key personnel and consultants, and the loss of certain personnel
or consultants could result in the loss of management continuity and institutional knowledge and negatively
affect our brand image and goodwill. In October 2015, Ms. Winfrey and the Company entered into a long-term,
strategic partnership, which included her making a substantial equity investment in the Company, joining our
Board of Directors, providing certain consulting services and granting us the right to use her name and marks.
Our ability to maintain our brand image and leverage the goodwill associated with Ms. Winfrey’s name may be
damaged if we were to lose her services or if the nature of our partnership changes. The loss of Ms. Winfrey’s
services or partnership with us for any reason (including as a result of her death or disability), any negative
market or industry perception with respect to her or her participation in the Company’s programs, or the failure
by Ms. Winfrey to provide services in her discretion to promote the Company, our programs, services and
products or to consult with us and participate in developing, planning, executing and enhancing our programs and
related initiatives, all in accordance with our strategic partnership arrangements with her, could have an adverse
effect on our business, financial condition and results of operations.
We also depend heavily upon our service providers to support our members and Personal Coaching
subscribers in their weight management efforts. If we fail to appropriately manage and motivate our service
16
providers, we may not be able to adequately service our customers which could negatively impact our sales of
services and products. Changes in factors such as overall unemployment levels, local competition for qualified
personnel, prevailing wage rates, changes in employment law, as well as rising employee benefits costs,
including insurance in the areas in which we operate, could increase our labor costs and interfere with our ability
to adequately retain qualified service providers to provide support to customers. Additionally, our inability to
attract and retain qualified personnel could delay or hinder our successfully executing our strategic initiatives.
The inability to renew certain of our licenses, or the inability to do so on terms that are favorable to us,
could have a material adverse effect on our financial results.
We have entered into licensing and endorsement relationships with numerous partners for the distribution
and sale of certain products that are relevant and helpful to weight-conscious consumers. These arrangements are
typically for fixed terms, following which the parties decide whether to extend the term of the arrangement.
There is no guarantee that we will reach mutually agreeable terms with our partners for extending an
arrangement. Similarly, in those instances where a licensee enjoys the option to extend the term of a license as a
result of having achieved certain conditions, there is no guarantee that the licensee will avail itself of such option.
Our financial results could be materially adversely affected if we are unable to extend a licensing or endorsement
arrangement, if we are unable to do so on terms favorable to us, or if we cannot locate a suitable alternative to an
incumbent licensee who has decided not to renew its arrangement.
Expiration or early termination by us of leases could have an adverse impact on our financial results.
Our operations, including corporate headquarters and back-office and customer service operations, are
located in leased office space and many of our meetings are held in leased space in retail centers. As leases
expire, we may not be able to renew them on acceptable terms or secure suitable replacement locations. If we
decide to relocate or close meeting locations before the expiration of the applicable lease term, we may incur
payments to landlords to terminate or “buy out” the remaining term of the lease. Any of the above events could
adversely impact our financial results.
Our international operations expose us to regulatory, economic, political and social risks in the countries
in which we operate.
The international nature of our operations involves a number of risks, including changes in US and foreign
regulations, tariffs, taxes and exchange controls, economic downturns, inflation and political and social
instability in the countries in which we operate and our dependence on foreign personnel. Foreign regulations
may also restrict our ability to operate in some countries, acquire new businesses, recur bill our customers or
repatriate cash from foreign subsidiaries back to the United States. We cannot be certain that we will be able to
enter and successfully compete in additional foreign markets or that we will be able to continue to compete in the
foreign markets in which we currently operate.
We are exposed to foreign currency risks from our international operations that could adversely affect our
financial results.
A significant portion of our revenues and operating costs are denominated in foreign currencies. We are
therefore exposed to fluctuations in the exchange rates between the US dollar and the currencies in which our
foreign operations receive revenues and pay expenses. We do not currently hedge, and have not historically
hedged, our operational exposure to foreign currency fluctuations. Our consolidated financial results are
presented in US dollars and therefore, during times of a strengthening US dollar, our reported international
revenues and earnings will be reduced because the local currency will translate into fewer US dollars. In addition,
the assets and liabilities of our non-US subsidiaries are translated into US dollars at the exchange rates in effect
at the balance sheet date. Revenues and expenses are translated into US dollars at the average exchange rate for
the period. Translation adjustments arising from the use of differing exchange rates from period to period are
17
recorded in shareholders’ equity as accumulated other comprehensive income (loss). Translation adjustments
arising from intercompany receivables and payables with our foreign subsidiaries are generally recorded as a
component of other expense (income). Accordingly, changes in currency exchange rates will cause our revenues,
operating costs, net income and shareholders’ equity to fluctuate. For example, these changes had a negative
impact on our fiscal 2015 financial results.
Our business may decline as a result of a downturn in general economic conditions or consumer
confidence.
Our business is highly dependent on meeting fees, Online product subscriptions and product sales. A
downturn in general economic conditions or consumer confidence in any of our major markets could result in
people curtailing or reallocating their discretionary spending which, in turn, could reduce attendance at our
meetings, Online product subscriptions and product sales. Any reduction in consumer spending may adversely
affect our business, financial condition or results of operations.
We may not successfully make acquisitions or enter into joint ventures and we may not successfully
integrate, operate or realize the anticipated benefits of such businesses.
As part of our strategic initiatives, we may pursue selected acquisitions or joint ventures. We may not be
able to effect these transactions on commercially reasonable terms or at all. Any future acquisitions or joint
ventures may require access to additional capital, and we may not have access to such capital on commercially
reasonable terms or at all. Even if we enter into these transactions, we may not realize the benefits we anticipate
or we may experience difficulties in integrating any acquired companies, technologies and products into our
existing business or in providing our services and products in newly acquired markets; attrition of key personnel
from acquired businesses; significant charges or expenses; higher costs of integration than we anticipated; or
unforeseen operating difficulties that require significant financial and managerial resources that would otherwise
be available for the ongoing development or expansion of our existing operations.
Our ability to influence the control of, or distributions from, our joint ventures may be limited by contract or
otherwise. If any of the other investors in one of our joint ventures fails to observe its commitments, or its
interests are different than ours, the joint venture may not be able to operate according to its business plan, we
may be required to increase our level of commitment, or such entities may take actions which are not in our best
interest. If we are unable to maintain our relationships with our joint venture partners, we could lose our ability to
operate in the geographies and/or markets in which they operate, which could have an adverse effect on our
business, financial condition or results of operations.
Consummating these transactions could also result in the incurrence of additional debt and related interest
expense, as well as unforeseen contingent liabilities, all of which could have an adverse effect on our business,
financial condition or results of operations. We may also issue additional equity in connection with these
transactions, which would dilute our existing shareholders.
The seasonal nature of our business could cause our operating results to fluctuate.
We have experienced and expect to continue to experience fluctuations in our quarterly results of operations
due to the seasonal nature of our business. The first quarter of the fiscal year typically results in the greatest
revenue due to the importance of the winter season to our overall recruitment environment. In addition, given the
subscription nature of our products, failure to realize recruitments during the winter season could negatively
impact our performance for the remainder of the year. This seasonality could cause our share price to fluctuate as
the results of an interim financial period may not be indicative of our full year results. Seasonality also impacts
relative revenue and profitability of each quarter of the year, both on a quarter-to-quarter and year-over-year
basis.
18
Any event that discourages or impedes people from gathering with others or accessing resources could
adversely affect our business.
Our meetings and Online businesses are subject to conditions beyond our control that may prevent or
impede current or prospective members from attending or joining meetings, or subscribers from accessing our
Online products, including extreme weather, terrorism, health epidemics, loss of resources such as electricity,
national disasters and other extraordinary events. The occurrence of any event that discourages people from
gathering with others or impedes their ability to access resources could adversely affect our business, financial
condition or results of operations.
Third parties may infringe on our brand and other intellectual property rights, which may have an
adverse impact on our business.
We currently rely on a combination of trademark, copyright, trade dress, trade secret, patent and other
intellectual property laws and domain name dispute resolution systems to establish and protect our proprietary
rights, including our brand. If we fail to successfully enforce our intellectual property rights, the value of our
brand, services and products could be diminished and our business may suffer. Our precautions may not prevent
misappropriation of our intellectual property, particularly in foreign countries where laws or law enforcement
practices may not protect our proprietary rights as fully as in the United States. Any legal action that we may
bring to protect our brand and other intellectual property could be unsuccessful and expensive and could divert
management’s attention from other business concerns. In addition, legal standards relating to the validity,
enforceability and scope of protection of intellectual property, especially in Internet-related businesses, are
uncertain and evolving. These evolving legal standards may not sufficiently protect our intellectual property
rights in the future.
We may be subject to intellectual property rights claims.
Third parties may make claims against us alleging infringement of their intellectual property rights. Any
intellectual property claims, regardless of merit, could be time-consuming and expensive to litigate or settle and
could significantly divert management’s attention from other business concerns. In addition, if we were unable to
successfully defend against such claims, we may have to pay damages, stop selling the service or product or stop
using the software, technology or content found to be in violation of a third party’s rights, seek a license for the
infringing service, product, software, technology or content or develop alternative non-infringing services,
products, software, technology or content. If we cannot license on reasonable terms, develop alternatives or stop
using the service, product, software, technology or content for any infringing aspects of our business, we may be
forced to limit our service and product offerings. Any of these results could reduce our revenues or our ability to
compete effectively, increase our costs or harm our business.
Outcomes of litigation or regulatory actions could adversely impact our financial condition.
From time to time, we may be a party to lawsuits and regulatory actions relating to our business operations.
For example, in the past, we have had disputes with our franchisees regarding operations and other contractual
issues. Due to the inherent uncertainties of legal actions and regulatory proceedings, we cannot predict their
outcomes with certainty. Therefore, it is possible that our results of operations, financial condition or cash flows
could be adversely affected by the unfavorable resolution of one or more legal or regulatory actions. As we
expand our offerings in certain healthcare channels, consumers may misconstrue our program as providing
medical advice. As we clearly state in our consumer communications, most of our service providers do not have
extensive training or certification in nutrition, diet or health fields beyond the training they receive from us.
Despite our disclaimers, as more customers come to us through the healthcare channel they may misperceive that
our service providers are providing medical advice regarding weight loss and related topics. We may also be
subject to claims that our service providers have provided inappropriate advice or have inappropriately referred
or failed to refer customers to health care providers when needed. Regardless of the outcome of any legal action
19
or regulatory proceeding, such actions and proceedings could result in substantial costs and may require that our
management devote substantial time and resources to defend us. For example, the previously disclosed adverse
UK tax ruling relating to the self-employment status of our UK leaders resulted in an aggregate adverse charge of
approximately $37.0 million.
Our businesses are subject to legislative and regulatory restrictions.
A number of laws and regulations govern our advertising, services, products, operations and relations with
consumers, licensees, franchisees, employees and other service providers, and government authorities in the
countries in which we operate.
Certain federal, state and foreign agencies, such as the FTC and FDA, regulate and enforce such laws and
regulations relating to advertising, promotions, packaging, privacy, consumer pricing and billing arrangements,
and other consumer protection matters. A determination by a federal, state or foreign agency, or a court in
connection with a governmental enforcement action or private litigation, that any of our practices do not meet
existing or new laws or regulations could result in liability, adverse publicity, and restrictions of our business
operations. For example, during the mid-1990s, the FTC filed complaints against a number of commercial weight
management providers alleging violations of federal law in connection with the use of advertisements that
featured testimonials, claims for program success and program costs. In 1997, we entered into a consent order
with the FTC settling all contested issues raised in the complaint filed against us. The consent order requires us to
comply with certain procedures and disclosures in connection with our advertisements of services and products.
We are subject to many distinct employment, labor, commercial, benefits and tax laws and regulations in
each country in which we operate, including regulations affecting our employment and wage and hour practices
and our relations with our employees and service providers. If we are required to comply with new laws or
regulations or interpretations of existing laws and regulations that differ from our interpretations, are unable to
comply with these laws, regulations or interpretations, or are subject to litigation with respect to these laws,
regulations or interpretations, our business and results of operations could be adversely affected.
Laws and regulations directly applicable to communications, operations or commerce over the Internet such
as those governing intellectual property, privacy and taxation, are more prevalent and continue to evolve. If we
are required to comply with new laws or regulations or interpretations of existing laws or regulations that differ
from our interpretations, or if we are unable to comply with these laws, regulations or interpretations, our
business and results of operations could be adversely affected.
Future laws or regulations, including laws or regulations affecting our advertising and marketing practices,
consumer pricing and billing arrangements, relations with consumers, employees, service providers, licensees or
franchisees, or our services and products, may have an adverse impact on us.
If we do not maintain effective internal control over financial reporting, we could fail to report our
financial results accurately.
Effective internal control over financial reporting is necessary for us to provide reliable financial reports. In
the past we have discovered, and in the future we may discover, areas of our internal control over financial
reporting that need improvement. In the future, if we identify a control deficiency that rises to the level of a
material weakness in our internal controls over financial reporting, this material weakness may adversely affect
our ability to record, process, summarize and report financial information timely and accurately and, as a result,
our financial statements may contain material misstatements or omissions. A material weakness is defined as a
deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is
reasonable possibility that a material misstatement of the annual or interim financial statements will not be
prevented or detected on a timely basis.
20
Artal effectively controls us and may have conflicts of interest with other shareholders in the future.
Artal effectively controls us and is effectively able to control the election and removal of our directors and
determine our corporate and management policies, including potential mergers or acquisitions, payment of
dividends, asset sales, the amendment of our articles of incorporation or bylaws and other significant corporate
transactions. This concentration of our ownership may delay or deter possible changes in control of our company,
which may reduce the value of an investment in our common stock. So long as Artal owns 10% or more of our
common stock, Artal will have the right pursuant to an agreement with us to nominate directors to our Board of
Directors in proportion to its stock ownership. In addition, Artal Luxembourg entered into a Voting Agreement
with Ms. Winfrey on October 18, 2015, pursuant to which Ms. Winfrey has agreed to vote all of her shares of our
common stock so as to elect such individuals designated as directors by Artal. The interests of Artal may not
coincide with the interests of other holders of our common stock.
We are a “controlled company” within the meaning of the New York Stock Exchange rules and, as a
result, qualify for exemptions from certain corporate governance requirements.
A group comprised of Artal and Ms. Winfrey controls a majority of the voting power of our outstanding
common stock. Under the New York Stock Exchange, or the NYSE, rules, a listed company of which more than
50% of the voting power for the election of directors is held by another person or group of persons acting
together is a “controlled company” and such a company may elect not to comply with certain NYSE corporate
governance requirements, including (1) the requirement that a majority of the Board of Directors consist of
independent directors, (2) the requirement that the nominating and corporate governance committee be composed
entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities,
(3) the requirement that the compensation committee be composed entirely of independent directors with a
written charter addressing the committee’s purpose and responsibilities, (4) that the compensation committee be
required to consider certain independence factors when engaging compensation consultants, legal counsel and
other committee advisors and (5) the requirement for an annual performance evaluation of the nominating and
corporate governance and compensation committees. We have elected to be treated as a “controlled company.”
Accordingly, our shareholders may not have the same protections afforded to shareholders of companies that are
subject to all of the NYSE corporate governance requirements.
Our articles of incorporation and bylaws and Virginia corporate law contain provisions that may
discourage a takeover attempt.
Provisions contained in our articles of incorporation and bylaws and the laws of Virginia, the state in which
we are incorporated, could make it more difficult for a third party to acquire us, even if doing so might be
beneficial to our shareholders. Provisions of our articles of incorporation and bylaws impose various procedural
and other requirements, which could make it more difficult for shareholders to effect certain corporate actions.
For example, our articles of incorporation authorize our Board of Directors to determine the rights, preferences,
privileges and restrictions of unissued series of preferred stock, without any vote or action by our shareholders.
Thus, our Board of Directors can authorize and issue shares of preferred stock with voting or conversion rights
that could adversely affect the voting or other rights of holders of our common stock. These rights may have the
effect of delaying or deterring a change of control of our company. In addition, a change of control of our
company may be delayed or deterred as a result of our having three classes of directors. These provisions could
limit the price that certain investors might be willing to pay in the future for shares of our common stock.
Item 1B. Unresolved Staff Comments
None.
21
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 in leased office spaces elsewhere in the United States. Each of our foreign
country operations generally also has leased office space to support its operations. Our meetings are typically
held in third-party locations (usually meeting rooms in well-located civic or other community centers) or space
leased in retail centers.
Our website and digital products and services are hosted on hardware and software co-located at a third-
party facility in New York and by third-party cloud service providers with facilities in various locations around
the United States. We also maintain a disaster recovery site with hardware and software co-located at a third-
party facility in Arizona.
Item 3.
Legal Proceedings
In re Weight Watchers International, Inc. Securities Litigation
In March 2014, two substantially identical putative class action complaints alleging violation of the federal
securities laws were filed by individual shareholders against the Company, certain of the Company’s current and
former officers and directors, and Artal Group, in the United States District Court for the Southern District of
New York. The complaints were purportedly filed on behalf of all purchasers of the Company’s common stock,
no par value per share, between February 14, 2012 and October 30, 2013, inclusive (referred to herein as the
Class Period). The complaints allege that, during the Class Period, the defendants disseminated materially false
and misleading statements and/or concealed material adverse facts. The complaints allege claims under Sections
10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder. The plaintiffs
seek to recover unspecified damages on behalf of the class members. In June 2014, the Court consolidated the
cases and appointed lead plaintiffs and lead counsel. On August 12, 2014, the plaintiffs filed an amended
complaint that, among other things, reduced the Class Period to between February 14, 2012 and February 13,
2013 and dropped all current officers and certain directors previously named as defendants. On October 14, 2014,
the defendants filed a motion to dismiss. The plaintiffs filed an opposition to the defendants’ motion to dismiss
on November 24, 2014 and the defendants filed a reply in support of their motion to dismiss on December 23,
2014. The Company continues to believe that the suits are without merit and intends to defend them vigorously.
Tracey Mead, Derivatively on Behalf of Weight Watchers International, Inc. vs. Artal Group et. al. and Weight
Watchers International, Inc.
On May 29, 2014 and June 23, 2014, the Company received shareholder litigation demand letters alleging
breaches of fiduciary duties and unjust enrichment by Company officers and directors and Artal, to the alleged
injury of the Company. The allegations in the letters relate to those contained in the ongoing federal securities
litigation described above. In response to the letters, pursuant to Virginia law, the Board of Directors has created
a special committee to review and evaluate the facts and circumstances surrounding the claims made in the
demand letters. The special committee has decided to undertake its review after receiving a decision on
defendants’ motion to dismiss in the federal securities litigation given the overlapping issues.
On August 11, 2015, a purported shareholder derivative lawsuit was filed in New York State Court in
Westchester County. The complaint alleges that certain Company directors and executive officers breached their
various fiduciary duties by knowingly causing the Company to repurchase shares from Artal and from certain
executive officers at artificially inflated prices in connection with a tender offer made to all shareholders. The
complaint seeks an order for the defendants to disgorge all profits made from selling Company stock between
March 16, 2012 and April 9, 2012, as well as an award for damages sustained by the alleged breaches of
fiduciary duty. The parties sought to stay this suit pending a decision on defendants’ motion to dismiss in the
federal securities litigation asserting similar allegations. The Court denied the stay, but at the preliminary court
conference on December 17, 2015, the Court granted an adjournment and scheduled the next court conference for
April 29, 2016. The Company believes that the suit is without merit and intends to defend it vigorously.
22
Raymond Roberts v. Weight Watchers International, Inc.
On January 7, 2016, an OnlinePlus member filed a putative class action complaint against the Company in
the Supreme Court of New York, New York County, asserting class claims for breach of contract and violations
of the New York General Business Law.
On February 5, 2016, the Company removed the case to the United States District Court, Sothern District of
New York. Specifically, the plaintiff is asserting that, as a result of the temporary glitches in the Company’s
website and app in November and December 2015, the Company has: (1) breached its Subscription Agreement
with its OnlinePlus members; and (2) engaged in misleading advertising and deceptive acts and practices in
violation of Sections 349 and 350 of the New York General Business Law. The plaintiff is seeking unspecified
actual, punitive and statutory damages, as well as his attorneys’ fees and costs incurred in connection with this
action. The Company believes that the suit is without merit and intends to defend it vigorously.
Other Litigation Matters
Due to the nature of the Company’s activities, it is also, at times, subject to pending and threatened legal
actions, including patent and other intellectual property actions, that arise out of the ordinary course of business.
In the opinion of management, the disposition of any such matters is not expected to have a material effect on the
Company’s results of operations, financial condition or cash flows. However, the results of legal actions cannot
be predicted with certainty. Therefore, it is possible that the Company’s results of operations, financial condition
or cash flows could be materially adversely affected in any particular period by the unfavorable resolution of one
or more legal actions.
Item 4. Mine Safety Disclosures
Not applicable.
23
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
Pursuant to General Instruction G(3) to Form 10-K, certain of the information regarding our directors and
executive officers required by Items 401(a), (b) and (e) of Regulation S-K is hereby included in Part I of this
Annual Report on Form 10-K.
Set forth below are the names, ages as of January 2, 2016 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 of our Board of Directors.
Name
Age
Position
James R. Chambers . . . . . . . . . . . . . . . . . . . . . .
Michael F. Colosi . . . . . . . . . . . . . . . . . . . . . . . .
Nicholas P. Hotchkin . . . . . . . . . . . . . . . . . . . . .
Jeanine Lemmens(1)
. . . . . . . . . . . . . . . . . . . . . .
Corinne Pollier(-Bousquet) . . . . . . . . . . . . . . . .
Raymond Debbane(2)
. . . . . . . . . . . . . . . . . . . . .
Steven M. Altschuler, M.D.(2)(3) . . . . . . . . . . . . .
Philippe J. Amouyal(2)
. . . . . . . . . . . . . . . . . . . .
Cynthia Elkins(3) . . . . . . . . . . . . . . . . . . . . . . . . .
Jonas M. Fajgenbaum . . . . . . . . . . . . . . . . . . . .
Denis F. Kelly(3) . . . . . . . . . . . . . . . . . . . . . . . . .
Sacha Lainovic . . . . . . . . . . . . . . . . . . . . . . . . . .
Christopher J. Sobecki . . . . . . . . . . . . . . . . . . . .
Oprah Winfrey . . . . . . . . . . . . . . . . . . . . . . . . . .
President and Chief Executive Officer, Director
President, United Kingdom
President, International
58
50 General Counsel and Secretary
50 Chief Financial Officer
45
51
60 Chairman of the Board of Directors
62 Director
57 Director
50 Director
43 Director
66 Director
59 Director
57 Director
61 Director
(1) We recently announced that Ms. Lemmens will leave the Company in April 2016.
(2) Member of Compensation Committee.
(3) Member of Audit Committee.
James R. Chambers. Mr. Chambers has served as a director and our President and Chief Executive Officer
since July 2013. He served as our President and Chief Operating Officer from January 2013 to July 2013. Prior to
joining us, Mr. Chambers served as President of the U.S. Snacks and Confectionary business unit and General
Manager of the Immediate Consumption Channel of Kraft Foods Inc., a global food and beverage company, from
January 2010 to July 2011. Prior to joining Kraft, Mr. Chambers held various positions in the North America
business unit at Cadbury plc, a beverage and confectionary company, from September 2005 to January 2010,
most recently as the President and Chief Executive Officer. Mr. Chambers began his career at Nabisco, Inc. and
also held various executive positions with Rémy Cointreau USA, Paxonix Inc., NetGrocer.com, Inc. and
Information Resources, Inc. Mr. Chambers received a Bachelor’s degree in Civil Engineering from Princeton
University and an M.B.A. from the Wharton School of Business of the University of Pennsylvania.
Mr. Chambers is a director of Big Lots, Inc.
Michael F. Colosi. Mr. Colosi has served as our General Counsel and Secretary since May 2014. Prior to
joining us, Mr. Colosi most recently served as Senior Vice President, General Counsel and Corporate Secretary
of Kenneth Cole Productions, Inc. (KCP), a multi-brand retail, wholesale and licensing company, from March
2007 to February 2014. His service as General Counsel and Secretary of KCP commenced in July 2000 and July
2004, respectively. He also served as Corporate Vice President of KCP from July 2000 to February 2007. Prior to
joining KCP, Mr. Colosi was Associate General Counsel and Assistant Secretary for The Warnaco Group, Inc.,
an international apparel company, from 1996 to 2000. Mr. Colosi received a Bachelor of Arts in Economics and
English from Cornell University and a Juris Doctor from The University of Michigan Law School.
Nicholas P. Hotchkin. Mr. Hotchkin has served as our Chief Financial Officer since August 2012. Prior to
joining us, Mr. Hotchkin had spent several years at Staples, Inc., a global leader in the office supply industry.
Most recently, Mr. Hotchkin served as Senior Vice President of Finance for the U.S. Retail division of Staples
24
based in Massachusetts, a position he held from May 2010 to August 2012. Before assuming that position, he had
been Senior Vice President of Finance and Treasurer of Staples, a position he held from November 2006 to April
2010. Prior to joining Staples, Mr. Hotchkin held several corporate finance positions with Delphi Corporation
and General Motors Corporation including assignments in the United States, Asia and Europe. Mr. Hotchkin
received a B.A. in Economics from Harvard College and an M.B.A. from the Harvard Business School.
Jeanine Lemmens. Ms. Lemmens has served as our President, United Kingdom since May 2013. Prior to
that time, Ms. Lemmens served as our Managing Director, Benelux from July 2006 to May 2013. Prior to joining
us, beginning in December 1999, Ms. Lemmens held various senior management and strategic positions with
Center Parcs Europe, an operator of European short holiday break villages, including most recently serving as the
Director B2B Strategy / Marketing from November 2005 to July 2006. Prior to joining Center Parcs Europe,
Ms. Lemmens was working as an accountant in the audit practice with Ernst & Young LLP where she serviced a
range of clients including many commercial clients. Ms. Lemmens holds a Certified Public Accountant degree
from Erasmus University in the Netherlands, an M.S. in Business Administration from Nyenrode Business
University in the Netherlands and a Bachelors of Art degree in Hospitality Management from Hotel School, The
Hague, Hospitality Business School in the Netherlands.
Corinne Pollier(-Bousquet). Ms. Pollier has served as our President, International since March 1, 2016.
Prior to that time, Ms. Pollier served as our President, Continental Europe & Australia–New Zealand from
January 2014 to March 2016, our President, Continental Europe from May 2013 to January 2014, our Senior
Vice President of France and Switzerland from October 2008 to May 2013 and our General Manager of France
from October 2003 to October 2008. Prior to joining us, from 1991 to 2003, Ms. Pollier was with VIVARTE
Group (France), a European retailer of footwear and apparel, where she held various positions in the finance and
planning analysis department from 1991 to 1995, various senior positions in the organization and strategy
department from 1995 to 2000 and as General Manager of Kookai from 2001 to 2003. Ms. Pollier also held
various product management and project management positions for the central buying office of Le Printemps
department stores from 1987 to 1991. Ms. Pollier is a graduate of HEC Business School Paris.
Raymond Debbane. Mr. Debbane has been the Chairman of our Board of Directors since our acquisition by
Artal Luxembourg S.A. on September 29, 1999. Mr. Debbane is a co-founder and the Chief Executive Officer of
The Invus Group, LLC. Prior to forming The Invus Group, LLC in 1985, Mr. Debbane was a manager and
consultant for The Boston Consulting Group in Paris, France. He holds an M.B.A. from Stanford Graduate
School of Business, an M.S. in Food Science and Technology from the University of California, Davis and a B.S.
in Agricultural Sciences and Agricultural Engineering from American University of Beirut. Mr. Debbane is the
Chairman of the Board of Directors of Lexicon Pharmaceuticals, Inc., and a director of Blue Buffalo Pet
Products, Inc. He is also the Chief Executive Officer and a director of Artal Group S.A. and the Chairman of the
Board of Directors of a number of private companies of which Artal or Invus, L.P. are shareholders.
Mr. Debbane was previously a director of Ceres, Inc.
Steven M. Altschuler, M.D. Dr. Altschuler has been a director since September 2012. Dr. Altschuler has
served as the Chief Executive Officer of the University of Miami Health System and Senior Vice President for
Healthcare at the University of Miami since January 2016. He previously served as the Chief Executive Officer
of The Children’s Hospital of Philadelphia (CHOP), one of the leading children’s hospitals in the United States,
from April 2000 until June 2015. Prior to assuming the role of Chief Executive Officer, Dr. Altschuler held
several positions at CHOP, including Physician-in-Chief and chief of the Division of Gastroenterology,
Hepatology and Nutrition. Prior to joining CHOP, Dr. Altschuler was faculty member and chair of the
Department of Pediatrics at the Perelman School of Medicine at the University of Pennsylvania. Dr. Altschuler
received a B.A. in mathematics and an M.D. from Case Western Reserve University. Dr. Altschuler is a director
of Mead Johnson Nutrition Company, where he is the Chair of the Compensation and Management Development
Committee and serves on the Nutrition Science and Technology Committee. Dr. Altschuler is also the Chair of
the Board of Directors of Spark Therapeutics, Inc.
25
Philippe J. Amouyal. Mr. Amouyal has been a director since November 2002. Mr. Amouyal is a Managing
Director of The Invus Group, LLC, a position he has held since 1999. Previously, Mr. Amouyal was a Vice
President and director of The Boston Consulting Group in Boston, MA. He holds an M.S. in Engineering and a
DEA in Management from Ecole Centrale de Paris and was a Research Fellow at the Center for Policy
Alternatives of the Massachusetts Institute of Technology. Mr. Amouyal is a director and member of the
Compensation Committee of Lexicon Pharmaceuticals, Inc. and Blue Buffalo Pet Products, Inc., as well as a
number of private companies of which Artal or Invus, L.P. are shareholders.
Cynthia Elkins. Ms. Elkins has been a director since March 2014. Since March 2011, Ms. Elkins has served
as the Vice President of IT Americas at Genentech, Inc., a member of the Roche Group, a leading biotechnology
company. She previously served as Genentech’s Senior Director of IT Enterprise Applications from December
2007 to February 2011. Prior to joining Genentech, Ms. Elkins was Vice President of Supplier Solutions and
Commerce Services at Ariba, Inc. and Vice President of Product Engineering at ATP Inc. Prior to that, she held
various IT positions at Aspect Telecommunications, VeriFone and Digital Equipment Corporation. Ms. Elkins
received a B.S. in Applied Mathematics from the University of California, Los Angeles and an M.B.A. from
Santa Clara University.
Jonas M. Fajgenbaum. Mr. Fajgenbaum has been a director since our acquisition by Artal Luxembourg S.A.
on September 29, 1999. Mr. Fajgenbaum is a Managing Director of The Invus Group, LLC, which he joined in
1996. Prior to joining The Invus Group, LLC, Mr. Fajgenbaum was a consultant for McKinsey & Company in
New York from 1994 to 1996. He graduated with a B.S. in Economics with a concentration in Finance from The
Wharton School of the University of Pennsylvania and a B.A. in Economics from the University of Pennsylvania.
Mr. Fajgenbaum is a director of a number of private companies of which Artal or Invus, L.P. are shareholders.
Denis F. Kelly. Mr. Kelly has been a director since May 2015. Mr. Kelly is a Partner, and served as a
Managing Partner, of Scura Paley Securities LLC, a private investment banking firm which he co-founded, since
2001. From 1993 to 2001, he was a Managing Director of Prudential Securities Incorporated. Previously, he
served as the President and Chief Executive Officer of Denbrook Capital Corporation, a merchant banking firm,
from 1991 to 1993. From 1980 to 1991, Mr. Kelly held various positions at Merrill Lynch, including Managing
Director of Mergers and Acquisitions and Managing Director of Merchant Banking. Mr. Kelly began his
investment banking career at Lehman Brothers in 1974. Mr. Kelly received a B.A. from Amherst College and an
M.B.A. from the Wharton School of Business of the University of Pennsylvania. Mr. Kelly is also a director of
MSC Industrial Direct Co., Inc., where he serves as a member of the Audit Committee and the chairman of the
Compensation Committee. Mr. Kelly previously served as a director of Kenneth Cole Productions, Inc., which is
no longer a public company.
Sacha Lainovic. Mr. Lainovic has been a director since our acquisition by Artal Luxembourg S.A. on
September 29, 1999. Since 2007, Mr. Lainovic has been Managing Partner of Invus Financial Advisors, LLC, a
New York-based investment firm, which he co-founded. From 1985 to 2006, Mr. Lainovic was Executive Vice
President of The Invus Group, LLC, which he co-founded. Prior to forming The Invus Group, LLC in 1985,
Mr. Lainovic was a manager and consultant for The Boston Consulting Group in Paris, France. He holds an
M.B.A. from Stanford Graduate School of Business and an M.S. in Engineering from Insa de Lyon in Lyon,
France.
Christopher J. Sobecki. Mr. Sobecki has been a director since our acquisition by Artal Luxembourg S.A. on
September 29, 1999. Mr. Sobecki is a Managing Director of The Invus Group, LLC, which he joined in 1989. He
received an M.B.A. from Harvard Business School. He also obtained a B.S. in Industrial Engineering from
Purdue University. Mr. Sobecki is a director of Lexicon Pharmaceuticals, Inc. and a number of private companies
of which Artal or Invus, L.P. are shareholders.
26
Oprah Winfrey. Ms. Winfrey has been a director since October 2015. Since January 2009, Ms. Winfrey has
served as the Chairman of her cable network, OWN: Oprah Winfrey Network, taking on the role of CEO in
July 2011. Previously, she founded Harpo, Inc. in 1986, under which she has launched numerous media and
entertainment businesses, including O, The Oprah Magazine and Harpo Films, in addition to producing the
award-winning talk show “The Oprah Winfrey Show” for 25 years. Ms. Winfrey is a global media leader,
philanthropist, producer and actress. She also has been serving as a member of the Smithsonian’s advisory
council since 2004.
27
PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of
Equity Securities
Our common stock is listed on the NYSE. Our common stock trades on the NYSE under the symbol
“WTW.”
The following table sets forth, for the periods indicated, the high and low sales prices per share for our
common stock as reported on the NYSE composite price history.
Fiscal 2015 (Year ended January 2, 2016)
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2014 (Year ended January 3, 2015)
High
Low
$21.53
$ 8.93
$ 7.14
$28.05
$6.71
$4.06
$3.67
$6.01
High
Low
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$33.43
$25.15
$27.90
$29.84
$19.50
$19.52
$19.09
$21.21
On October 9, 2003, our Board of Directors authorized, and we announced, a program to repurchase up to
$250.0 million of our outstanding common stock. On each of June 13, 2005, May 25, 2006 and October 21, 2010,
our Board of Directors authorized, and we announced, adding $250.0 million to this program. The repurchase
program allows for shares to be purchased from time to time in the open market or through privately negotiated
transactions. No shares will be purchased from Artal Holdings Sp. z o.o., Succursale de Luxembourg, or Artal
Holdings, and its parents and subsidiaries under this program. The repurchase program currently has no
expiration date. We repurchased no shares of our common stock during the fourth quarter of fiscal 2015. As of
the end of fiscal 2015, $208.9 million remained available to purchase shares of our common stock under the
repurchase program.
Holders
The approximate number of holders of record of our common stock as of February 1, 2016 was 287. This
number does not include beneficial owners of our securities held in the name of nominees.
Dividends
On October 30, 2013, we announced that we suspended our quarterly cash dividend. Prior to the suspension,
we had been issuing a quarterly cash dividend of $0.175 per share of our common stock every quarter for several
fiscal years. We currently intend to use the annual cash savings from such dividend suspension to preserve
financial flexibility while funding our strategic growth initiatives and building cash for future debt repayments.
Any future determination to declare and pay dividends will be made at the discretion of our Board of Directors,
after taking into account our financial results, capital requirements and other factors it may deem relevant. The
WWI Credit Facility (as defined below) also contains restrictions on our ability to pay dividends on our common
28
stock. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Liquidity and Capital Resources—Long-Term Debt” in Part II, and “Item 15. Exhibits and Financial Statement
Schedules—Financial Statements—Note 7. Long-Term Debt”, of this Annual Report on Form 10-K for a
description of the WWI Credit Facility.
Stock Performance Graph
The following graph sets forth the cumulative return on our common stock from December 31, 2010, the
last trading day of our 2010 fiscal year, through December 31, 2015, the last trading day of our 2015 fiscal year,
as compared to the cumulative return of the Standard & Poor’s 500 Index, or the S&P 500 Index, and the
cumulative return of the Standard & Poor’s MidCap 400 Index, or the S&P MidCap 400 Index. We selected the
S&P 500 Index because it is a broad index of equity markets. We selected the S&P MidCap 400 Index, which is
generally comprised of issuers having a similar market capitalization with the Company at the times presented,
because we believe that there are no other lines of business or published industry indices or peer groups that
provide a more meaningful comparison of the cumulative return of our stock. The graph assumes that $100 was
invested on December 31, 2010 in each of (1) our common stock, (2) the S&P 500 Index and (3) the
S&P MidCap 400 Index, and that all dividends were reinvested.
$200.00
150.00
100.00
50.00
0.00
12.31.10
12.30.11
12.28.12
12.27.13
1.2.15
12.31.15
Weight Watchers International, Inc.
S&P 500 Index
S&P MidCap 400 Index
Company/Index
12.31.10
12.30.11
12.28.12
12.27.13
1.2.15
12.31.15
Weight Watchers International, Inc.
. . . . . . . . . . . . . . . .
S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S&P MidCap 400 Index . . . . . . . . . . . . . . . . . . . . . . . . . .
100.00
100.00
100.00
148.40
102.11
98.27
139.18
116.48
114.01
90.61
156.21
153.89
59.62
178.25
169.62
63.14
180.75
166.06
Cumulative Total Return ($)
29
Item 6.
Selected Financial Data
The following schedule sets forth our selected financial data for the last five fiscal years.
SELECTED FINANCIAL DATA
(in millions, except per share amounts)
Fiscal 2015
(52 weeks)
Fiscal 2014
(53 weeks)
Fiscal 2013
(52 weeks)
Fiscal 2012
(52 weeks)
Fiscal 2011
(52 weeks)
Revenues, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to the Company . . . . . . . . . . .
Working capital deficit
. . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,164.4
$
32.9
$ (144.2) $
$1,422.1
$2,021.3
$1,479.9
$ 117.8
$1,839.4
$ 257.4
$1,724.1
$ 202.7
$1,832.5
$ 304.9
(6.0) $ (30.1) $ (229.9) $ (279.7)
$1,121.6
$ 926.9
$1,405.9
$2,358.0
$1,218.6
$2,291.7
$1,534.6
$2,277.3
$
$
0.56
0.56
$
$
2.08
2.08
$
$
3.61
3.60
$
$
$
4.27
4.23
0.70
$
$
$
4.16
4.11
0.70
Dividends declared per common share . . . . . . . . . . . .
$ — $ — $
0.53
Items Affecting Comparability
Several events occurred during each of the last five fiscal years that affect the comparability of our financial
statements. The nature of these events and their impact on underlying business trends are as follows:
Winfrey Transaction
On October 19, 2015, pursuant to the Winfrey Purchase Agreement, we issued and sold to Ms. Winfrey an
aggregate of 6.4 million shares of our common stock for an aggregate cash purchase price of $43.2 million.
In consideration of Ms. Winfrey entering into the Strategic Collaboration Agreement and the performance
of her obligations thereunder, on October 18, 2015, we granted Ms. Winfrey the Winfrey Option to purchase
3.5 million shares of our common stock at an exercise price of $6.97 per share.
In fiscal 2015, net income and earnings per fully diluted share, or EPS, were negatively impacted by
expenses of $8.3 million after tax or $0.14 per fully diluted share in connection with the Winfrey Transaction.
More specifically, we recorded compensation expense of $7.8 million after tax for the full value of the Winfrey
Option in the fourth quarter of fiscal 2015 (based on the Black Scholes option pricing model), as well as $0.5
million after tax of expenses for legal, compliance and other fees in connection with the Winfrey Transaction.
See “Item 1. Business—History—Winfrey Transaction” for additional details on the Winfrey Transaction.
Restructuring Charges
In fiscal 2015 and fiscal 2014, we recorded $8.4 million ($5.1 million after tax or $0.09 per fully diluted
share) and $11.8 million ($7.2 million after tax or $0.13 per fully diluted share) of charges, respectively,
associated with the restructuring of our organization.
Early Extinguishment of Debt
Net income and EPS for the full year of fiscal 2015 were impacted by an $11.4 million ($7.0 million after
tax), or $0.12 per fully diluted share, gain on early extinguishment of debt in connection with the payment of an
aggregate amount of cash proceeds totaling $134.6 million plus an amount sufficient to pay accrued and unpaid
30
interest on the amount prepaid to prepay $148.0 million in aggregate principal amount of term loans under the
Tranche B-1 Term Facility (defined hereafter).
Net income and EPS for the full year of fiscal 2013 were impacted by a $21.7 million ($13.3 million after
tax), or $0.24 per fully diluted share, early extinguishment of debt charge recorded in fiscal 2013 resulting from
the write-off of fees in connection with our April 2013 debt refinancing.
Net Tax Benefit
In fiscal 2014, we recognized a $2.4 million net tax benefit related to an intercompany loan write-off in
connection with the closure of our China business partially offset by the recognition of a valuation allowance
related to tax benefits for foreign losses that are not expected to be realized.
UK Self-Employment Matter
We received an adverse tax ruling in the United Kingdom that our UK leaders should have been classified
as employees for UK tax purposes and, as such, we should have withheld tax from our leaders pursuant to the
“Pay As You Earn” and national insurance contributions collection rules and remitted such amounts to Her
Majesty’s Revenue and Customs, or HMRC. In connection with this ruling, we recorded a charge of
approximately $36.7 million, of which approximately $4.2 million was with respect to fiscal 2009 and
approximately $32.5 million was with respect to fiscal years 2001 through 2008, to cost of revenues in the fourth
quarter of fiscal 2009. We subsequently recorded a charge of approximately $4.1 million and $3.0 million in
fiscal 2010 and fiscal 2011, respectively. In December 2012, we reached an agreement with HMRC to settle the
matter in its entirety for approximately $36.8 million. Based upon the settlement amount, we determined that
$14.5 million of the reserved amount represented an over-accrual and as such was reversed to cost of revenues.
As part of the settlement amount, the settlement agreement provided for an amount of interest to be paid which
resulted in a $7.1 million increase to interest expense. The net benefit associated with the settlement was an
increase of $7.4 million to income before income taxes. The reserve for this matter at the end of fiscal 2012
equaled approximately $7.3 million in the aggregate based on the exchange rates at the end 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.
Long-Term Debt
On March 15, 2012, the composition of our then-existing credit facilities, or collectively, the Prior WWI
Credit Facility, changed as a result of our amending and restating the Prior WWI Credit Facility to, among other
things, extend the maturity of certain of our term loan facilities and our revolving credit facility and to obtain
new commitments for the borrowing of an additional $1,449.4 million of term loans to finance the purchases of
shares of our common stock in our previously disclosed “modified Dutch auction” tender offer for our common
stock and from Artal Holdings pursuant to the related share purchase agreement in the first six months of fiscal
2012. Following the amendment of the Prior WWI Credit Facility, (i) $33.1 million in aggregate principal
amount of the Term A-1 Loan and $301.8 million in aggregate principal amount of the Term C Loan were
converted into, and $849.4 million in aggregate principal amount of commitments to borrow new term loans
were provided under, the new Term E Loan (as defined hereafter), (ii) $107.0 million in aggregate principal
amount of the Term B Loan and $119.1 million in aggregate principal amount of the Term D Loan were
converted into, and $600.0 million in aggregate principal amount of commitments to borrow new term loans
were provided under, the new Term F Loan, and (iii) $262.0 million in aggregate principal amount of
commitments under the Revolver A-1 were converted into the new revolving credit facility, Revolver A-2. The
loans outstanding under each term loan facility existing prior to the amendment of the Prior WWI Credit Facility
and the loans and commitments outstanding under the Revolver A-1, in each case that were not converted into
the Term E Loan, the Term F Loan or the Revolver A-2, as applicable, continued to remain outstanding under the
Prior WWI Credit Facility as the Term A-1 Loan, the Term B Loan, the Term C Loan, the Term D Loan or the
31
Revolver A-1, as applicable. In connection with this amendment, we incurred fees of approximately
$26.2 million in the first quarter of fiscal 2012.
On April 2, 2013, we refinanced our credit facilities pursuant to a new Credit Agreement, or as amended,
supplemented or otherwise modified, the Credit Agreement, among the Company, the lenders party thereto,
JPMorgan Chase Bank, N.A., as administrative agent and an issuing bank, The Bank of Nova Scotia, as revolving
agent, swingline lender and an issuing bank, and the other parties thereto. The Credit Agreement provides for (a) a
revolving credit facility (including swing line loans and letters of credit) in an initial aggregate principal amount of
$250.0 million that will mature on April 2, 2018, or the Revolving Facility, (b) an initial term B-1 loan credit
facility in an aggregate principal amount of $300.0 million that will mature on April 2, 2016, or Tranche B-1 Term
Facility, and (c) an initial term B-2 loan credit facility in an aggregate principal amount of $2,100.0 million that will
mature on April 2, 2020, or Tranche B-2 Term Facility. We refer herein to the Tranche B-1 Term Facility together
with the Tranche B-2 Term Facility as the Term Facilities, and the Term Facilities and Revolving Facility
collectively as the WWI Credit Facility. In connection with this refinancing, we used the proceeds from borrowings
under the Term Facilities to pay off a total of $2,399.9 million of outstanding loans, consisting of $128.8 million of
Term B Loans, $110.6 million of Term C Loans, $117.6 million of Term D Loans, $1,125.0 million of Term E
Loans, $817.9 million of Term F Loans, $21.2 million of loans under the Revolver A-1 and $78.8 million of loans
under the Revolver A-2. Following the refinancing of a total of $2,399.9 million of loans, at April 2, 2013, we had
$2,400.0 million debt outstanding under the Term Facilities and $248.8 million of availability under the Revolving
Facility. We incurred fees of $44.8 million during the second quarter of fiscal 2013 in connection with this
refinancing. In the second quarter of fiscal 2013, we wrote-off fees associated with this refinancing which resulted
in our recording a charge of $21.7 million in early extinguishment of debt.
On September 26, 2014, we entered into an agreement with certain lenders amending the Credit Agreement
that, among other things, eliminated the Financial Covenant (as defined in the Credit Agreement) with respect to
the Revolving Facility. In connection with this amendment, we wrote-off deferred financing fees of
approximately $1.6 million in the third quarter of fiscal 2014. Concurrently with and in order to effect this
amendment, we reduced the amount of the Revolving Facility from $250.0 million to $50.0 million.
Under the terms of the Credit Agreement, depending on our Consolidated Leverage Ratio (as defined in the
Credit Agreement), we are obligated to offer to prepay the Term Facilities in an aggregate amount determined by
our excess cash flow (as defined in the Credit Agreement). On March 13, 2015, we commenced an offer to
prepay at a discount to par up to $75.0 million in aggregate principal amount of term loans outstanding under the
Tranche B-1 Term Facility. On March 20, 2015, we accepted offers with a discount equal to or greater than
9.00% in respect of such term loans. On March 25, 2015, we paid an aggregate amount of cash proceeds totaling
$57.4 million plus an amount sufficient to pay accrued and unpaid interest on the amount prepaid to prepay
$63.1 million in aggregate principal amount of such term loans under the Tranche B-1 Term Facility. This
expenditure reduced, on a dollar for dollar basis, our $59.7 million obligation to make a mandatory excess cash
flow prepayment offer to the term loan lenders under the terms of the Credit Agreement. In addition, we made a
voluntary prepayment at par on March 25, 2015 of $2.5 million in respect of such term loans under the Tranche
B-1 Term Facility to reduce the remaining excess cash flow prepayment obligation for fiscal 2015. As a result of
this prepayment, we wrote-off fees of $0.3 million, incurred fees of $0.6 million and recorded a gain on early
extinguishment of debt of $4.7 million, inclusive of these fees, in the first quarter of fiscal 2015.
On June 17, 2015, we commenced another offer to prepay at a discount to par up to $229.0 million in
aggregate principal amount of term loans outstanding under the Tranche B-1 Term Facility. On June 22, 2015,
we accepted offers with a discount equal to or greater than 9.00% in respect of such term loans. On June 26,
2015, we paid an aggregate amount of cash proceeds totaling $77.2 million plus an amount sufficient to pay
accrued and unpaid interest on the amount prepaid to prepay $84.9 million in aggregate principal amount of such
term loans under the Tranche B-1 Term Facility. As a result of this prepayment, we wrote-off fees of
$0.3 million, incurred fees of $0.6 million and recorded a gain on early extinguishment of debt of $6.7 million,
inclusive of these fees, in the second quarter of fiscal 2015.
32
On July 14, 2015, we drew down the $48.0 million available on our Revolving Facility in order to enhance
our cash position and to provide additional financial flexibility. The revolver borrowing has been classified as a
short-term liability in consideration of the fact that the terms of the Revolving Facility require an assessment as
to whether there have been any material adverse changes with respect to the Company in connection with our
monthly interest elections. Although the revolver borrowing has been classified as a short-term liability, absent
any change in fact and circumstance, we have the ability to extend and not repay the Revolving Facility until its
due date of April 2, 2018.
For additional details on the WWI Credit Facility, see “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations—Liquidity and Capital Resources—Long-Term Debt” in Part II
of this Annual Report on Form 10-K.
Working Capital
In fiscal 2015, the change in working capital was driven in large part by the increase in short-term debt due
within one year and the decline in cash resulting from the prepayment of debt during the fiscal year. The
refinancing of our credit facilities in April 2013 resulted in much lower debt repayments in fiscal 2013 and fiscal
2014 as compared to our debt repayments in fiscal 2011 and fiscal 2012. Our lower debt repayment obligations in
fiscal 2013 and fiscal 2014 drove increases in cash in those years thereby lowering the working capital deficit.
Other Comprehensive Loss
Other comprehensive loss, net of taxes, was $18.3 million in fiscal 2015 as compared to $28.9 million in
fiscal 2014 primarily due to the unfavorable impact of foreign currency translation adjustments and to a lesser
extent the mark to market of our interest rate swap. In fiscal 2015, foreign currency translation adjustments
unfavorably impacted results by $27.8 million ($17.0 million after tax) as compared to $19.2 million
($11.7 million after tax) in fiscal 2014 primarily due to the devaluation of the Euro, Canadian dollar, and the
British Pound. In addition, due to hedge accounting, Changes in Other Comprehensive Loss decreased by
$2.2 million ($1.4 million after tax) in fiscal 2015 as compared to $28.3 million ($17.3 million after tax) in fiscal
2014.
Acquisition of Additional Equity Interest in Brazil and Gain on Brazil Acquisition
Prior to March 12, 2014, the Company had owned 35% of Vigilantes do Peso Marketing Ltda., or VPM, a
Brazilian limited liability partnership. On March 12, 2014, the Company acquired an additional 45% equity
interest in VPM for a net purchase price of $14.2 million. VPM was converted into a joint-stock corporation prior
to closing and subsequently operates as a subsidiary of the Company with rights to conduct typical business lines.
As a result of the acquisition, the Company gained a direct controlling financial interest in VPM and began to
consolidate this entity as of the date of acquisition.
As a result of our Brazil acquisition, we adjusted our previously held equity interest to fair value of
$11.0 million and recorded a charge of $0.5 million associated with the settlement of the royalty-free
arrangement of the Brazilian partnership. The net effect of these items resulted in our recognizing a gain of
$10.5 million ($6.4 million after tax or $0.11 per fully diluted share) in fiscal 2014.
Acquisition of Wello
On April 16, 2014, the Company acquired Knowplicity, Inc., d/b/a Wello, an online fitness and personal
training company for a net purchase price of $9.0 million. Payment was in the form of common stock issued of
$4.2 million and cash of $4.8 million. As a result of the acquisition, Wello became a wholly-owned subsidiary of
the Company and the Company began to consolidate the entity as of the date of acquisition.
33
Acquisition of Weilos
On March 11, 2015, the Company acquired for a purchase price of $6.7 million Weilos, Inc., or Weilos, a
California-based startup with an online social platform that provides a mobile health and weight loss community.
Payment was in the form of common stock issued of $2.8 million, restricted stock issued of $0.1 million and cash
of $2.8 million plus cash in reserves of $1.0 million. As a result of the acquisition, Weilos became a wholly
owned subsidiary of the Company and the Company began to consolidate the entity as of the date of acquisition.
Franchisee Acquisitions
The following are our acquisitions since the beginning of fiscal 2011:
Acquisitions of Alberta and Saskatchewan, West Virginia, Columbus, Reno, Manitoba and Franklin and St.
Lawrence Counties. On March 4, 2013, we acquired substantially all of the assets of our Alberta and
Saskatchewan, Canada franchisees, Weight Watchers of Alberta Ltd. and Weight Watchers of Saskatchewan
Ltd., for an aggregate purchase price of $35.0 million. On July 15, 2013, we acquired substantially all of the
assets of our West Virginia franchisee, Weight Watchers of West Virginia, Inc., for a net purchase price of
$16.0 million. On July 22, 2013, we acquired substantially all of the assets of our Columbus, Ohio franchisee,
Weight Watchers of Columbus, Inc., for a net purchase price of $23.4 million and our Reno, Nevada franchisee,
Weight Watchers of Northern Nevada, Inc., for a net purchase price of $4.0 million. On October 28, 2013, we
acquired substantially all of the assets of our Manitoba, Canada franchisee, Weight Watchers of Manitoba Ltd.,
for a net purchase price of $5.2 million and our Franklin and St. Lawrence Counties, New York franchisee,
Weight Watchers of Franklin and St. Lawrence Counties Inc., for a net purchase price of $0.3 million.
Acquisitions of Southeastern Ontario and Ottawa, Adirondacks and Memphis. On September 10, 2012, we
acquired substantially all of the assets of our Southeastern Ontario and Ottawa, Canada franchisee, Slengora
Limited, for a net purchase price of $16.8 million. On November 2, 2012, we acquired substantially all of the
assets of our Adirondacks franchisee, Weight Watchers of the Adirondacks, Inc., for a purchase price of
$3.4 million. On December 20, 2012, we acquired substantially all of the assets of our Memphis, Tennessee
franchisee, Weight Watchers of the Mid-South, Inc., for a purchase price of $10.0 million.
These acquisitions were financed through cash from operations. These acquisitions have been accounted for
as purchases and financial results have been included in our consolidated operating results since their respective
dates of acquisition.
34
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion in conjunction with the “Selected Financial Data” included in
Item 6 of this Annual Report on Form 10-K and our consolidated financial statements and related notes included
in Item 15 of this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve
risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary
statements discussed in “Cautionary Notice Regarding Forward-Looking Statements” and elsewhere in this
Annual Report on Form 10-K should be read as applying to all forward-looking statements wherever they appear
in this Annual Report on Form 10-K. Our actual results could differ materially from those discussed here.
Factors that could cause or contribute to these differences include, without limitation, those discussed in
“Risk Factors” included in Item 1A of this Annual Report on Form 10-K.
Overview
We are a leading, global-branded consumer company and the world’s leading commercial provider of
weight management services, operating globally through a network of Company-owned and franchise operations.
With over five decades of weight management experience, expertise and know-how, we have established Weight
Watchers as one of the most recognized and trusted brand names among weight-conscious consumers. Weight
Watchers-branded products and services include meetings conducted by us and our franchisees, digital weight
management products provided through our websites, mobile sites and apps, products sold at meetings, licensed
products sold in retail channels and magazine subscriptions and other publications. Our primary sources of
revenue are subscriptions for our monthly commitment plans for Weight Watchers meetings and Online
subscriptions. Our “meetings” business refers to providing access to meetings to our monthly commitment plan
subscribers, “pay-as-you-go” members, Total Access subscribers and other meeting members. “Online” refers to
Weight Watchers Online, Weight Watchers OnlinePlus, Personal Coaching and other digital subscription
products.
We operate in numerous countries around the world, including through our franchise operations. We have
four reportable segments based on an integrated geographical structure as follows: North America, United
Kingdom, Continental Europe (CE) and Other. See the section entitled “Business—Business Organization and
Global Operations” in Item 1 of this Annual Report on Form 10-K for further information on these reportable
segments and the countries in which we operate.
Components of our Results of Operations
Revenues
We derive our revenues principally from:
•
•
•
Service Revenues. Our “Service Revenues” consist of “Meeting Fees” and “Online Subscription
Revenues”. “Meeting Fees” consist of the fees associated with our monthly commitment plans for
unlimited access to meetings and other payment arrangements for access to meetings, including our
“pay-as-you-go” payment arrangement and fees associated with our Total Access product. “Online
Subscription Revenues” consist of the fees associated with subscriptions for our Online subscription
products, including our Personal Coaching product.
In-meeting product sales. We sell a range of products that complement our weight management
program, including bars, snacks, cookbooks, food and restaurant guides with SmartPoints values,
Weight Watchers magazines, SmartPoints calculators and fitness kits, and certain third-party products,
such as activity-tracking monitors.
Licensing, franchise royalties and other. We license the Weight Watchers brand and our other
intellectual property in certain categories of food and other relevant consumer products. We also
endorse carefully selected branded consumer products. In addition, our franchisees typically pay us a
royalty fee of 10% of their meeting fee revenues as well as purchase products for sale in their meetings.
35
We also generate revenues from subscription sales for our magazines, third-party advertising in our
publications, the sale of third-party Internet advertising, ecommerce fees and the sale of By Mail
product.
The following table sets forth our revenues by category for the past three fiscal years.
Revenue Sources
(in millions)
Service Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-meeting product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Licensing, franchise royalties and other . . . . . . . . . . . . . . . . . . .
Fiscal 2015
Fiscal 2014
Fiscal 2013
(52 weeks)
$ 937.4
127.3
99.7
(53 weeks)
$1,181.9
169.1
128.9
(52 weeks)
$1,360.8
212.0
151.4
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,164.4
$1,479.9
$1,724.1
Note: Totals may not sum due to rounding.
From fiscal 2013 through fiscal 2015, our revenues decreased at a compound annual rate of 17.8% primarily
driven by a decline in Service Revenues. Additional revenue details are as follows:
•
•
•
Service Revenues. Service Revenues declined at a compound annual rate of 17.0% from fiscal 2013 to
fiscal 2015 due to a decline in Total Paid Weeks from negative recruitment trends in both our meetings
and Online businesses in the majority of the countries in which we operate. See “—Material Trends—
Performance Indicators” below for an explanation of our paid weeks metric. During this period,
recruitment was the biggest challenge in our business, as we faced strong competition for consumer
trial from an evolving competitor set, including mobile apps and activity monitors. Additionally, the
increasing focus of consumers on more integrated lifestyle and fitness approaches rather than just food,
nutrition and diet also negatively impacted our recruitment.
In-meeting product sales. Global in-meeting product sales were down 22.5% on a compound annual
rate from fiscal 2013 through fiscal 2015. This decline was primarily driven by a decline in the number
of members attending meetings during that period. In addition, our average product sales per attendee
in our meetings business declined from $4.94 to $4.00 at a compound annual rate of 10.0% during this
period primarily as a result of lower sales of enrollment products and a lack of successful new product
and program launches.
Licensing, franchise royalties and other. All other revenues were down 18.8% on a compound annual
rate from fiscal 2013 through fiscal 2015. This decline was driven in part by declining licensing
revenues which declined at a compound annual rate of 18.6% from fiscal 2013 through fiscal 2015.
Our licensing business was negatively impacted by competition from lower-priced, store-branded
products as well as reduced consumer demand for products in the diet category. In addition, lower
revenues from our franchisees, which declined at a compound annual rate of 19.4% during this period,
were driven by market performance and our acquisition of seven of our franchisees in fiscal 2013.
Cost of Revenues
Total cost of revenues primarily consists of expenses to operate our meetings, costs to sell products in our
meeting rooms and on the Internet and costs to operate our website and Online products. Operating costs
primarily consist of salary, commissions and expenses paid to our service providers, salary expense of field staff,
meeting room rent, customer service costs (both in-house and third-party), program material expenses,
depreciation and amortization associated with field automation, credit card and fulfillment fees, training and
other expenses incurred to support our field organization. Operating costs also include costs associated with our
24/7 Expert Chat and Personal Coaching offerings introduced in December of 2014. Cost to sell products
includes costs of products purchased from our third-party suppliers, inventory reserves, royalties, inbound and
36
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$574.1
$802.6
$1,001.1
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)
. . . . . . . . . . . . .
Gross Margin, as adjusted(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.1%)
49.4%
(0.3%)
54.6%
0.0%
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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Operating Income Margin
The following table sets forth our Operating Income for the past three fiscal years, as adjusted to exclude the
impact of charges from our previously disclosed 2015 and 2014 restructuring plans and the expenses associated
with the Winfrey Transaction:
(in millions)
2015
2014
2013
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Income Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
168.1
14.4%
$299.3
$457.8
20.2%
26.5%
Adjustments to Reported Amounts
Restructuring charges(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Winfrey Transaction Expenses(1) . . . . . . . . . . . . . . . . . . . . . . .
8.4
13.6
11.8
—
—
—
Operating Income, as adjusted(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$190.1
$311.2
$457.8
Operating Income Margin impact from above adjustments(1) . . . . .
Operating Income Margin, as adjusted(1)
. . . . . . . . . . . . . . . . . . . .
-1.9%
16.3%
-0.8%
21.0%
0.0%
26.5%
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 $8.4 million and $11.8 million of restructuring charges associated with our previously disclosed fiscal 2015 and
2014 restructuring plans, respectively, and the $13.6 million of expenses associated with the Winfrey Transaction, which includes $12.8
million of stock compensation related to the Winfrey Option. See “Non-GAAP Financial Measures” below for an explanation of our use
of non-GAAP financial measures.
In fiscal 2014, the decrease in operating income margin from fiscal 2013 was primarily the result of lower
gross margin partially offset by lower marketing expense. The decline was primarily driven by lower TV media
and production costs from first-time integrated, as well as the sharing among markets of, TV spots for both our
meetings and Online businesses, and lower and more efficient digital marketing spend in the United States.
In fiscal 2015, the decrease in operating income margin from fiscal 2014 was primarily the result of lower
gross margin and higher general and administrative expenses as a percentage of revenues, partially offset by
lower marketing expense. Excluding expenses associated with the Winfrey Transaction, general and
administrative expenses as a percentage of revenues were flat versus the prior year. The decline in marketing
expense from fiscal 2014 was primarily driven by lower TV media and production costs globally as well as lower
agency fees and celebrity and talent costs primarily in the United States.
Material Trends
Performance Indicators
Our management reviews and analyzes several key performance indicators in order to manage our business
and assess the quality and potential variability of our cash flows and earnings. These key performance indicators
include:
•
•
Revenues—Our “Service Revenues” consist of “Meeting Fees” and “Online Subscription Revenues”.
“Meeting Fees” consist of the fees associated with our monthly commitment plans for unlimited access
to meetings and other payment arrangements for access to meetings, including our “pay-as-you-go”
payment arrangement and fees associated with our Total Access product. “Online Subscription
Revenues” consist of the fees associated with subscriptions for our Online subscription products,
including our Personal Coaching product.
Paid Weeks—The “Paid Weeks” metric reports paid weeks by Weight Watchers customers in
Company-owned operations for a given period as follows: (i) “Meeting Paid Weeks” is the sum of total
paid commitment plan weeks (including Total Access) and total “pay-as-you-go” weeks; (ii) “Online
Paid Weeks” is the total paid subscription weeks for our digital subscription products (including
Personal Coaching); and (iii) “Total Paid Weeks” is the sum of Meeting Paid Weeks and Online Paid
Weeks, in each case for a given period.
38
•
•
•
•
Incoming Active Subscribers/Active Base—“Subscribers” refer to meetings members and Online
subscribers who participate in recurring billing programs, such as our monthly commitment plans for
our meetings business. The “Incoming Active Subscribers” metric reports active Weight Watchers
subscribers in Company-owned operations at a given period start as follows: (i) “Incoming Active
Meeting Subscribers” is the total Weight Watchers monthly commitment plan active subscribers
(including Total Access); (ii) “Incoming Active Online Subscribers” is the total number of Weight
Watchers Online, Weight Watchers OnlinePlus and Personal Coaching active subscribers; and
(iii) “Incoming Active Subscribers” is the sum of Incoming Active Meeting Subscribers and Incoming
Active Online Subscribers, in each case at a given period start. We also at times refer to such metrics as
the “Incoming Active Base”.
End of Period Active Subscribers/Active Base—The “End of Period Active Subscribers” metric reports
active Weight Watchers subscribers in Company-owned operations at a given period end as follows:
(i) “End of Period Active Meeting Subscribers” is the total Weight Watchers monthly commitment
plan active subscribers (including Total Access); (ii) “End of Period Active Online Subscribers” is the
total number of Weight Watchers Online, Weight Watchers OnlinePlus and Personal Coaching active
subscribers; and (iii) “End of Period Active Subscribers” is the sum of End of Period Active Meeting
Subscribers and End of Period Active Online Subscribers, in each case at a given period end. We also
at times refer to such metrics as the “End of Period Active Base”.
recruitments
attendance
• Meeting Fees per Paid Week and in-meeting product sales per attendee
•
gross profit and operating expenses as a percentage of revenue
Transformation Plan
As previously disclosed, the Company is currently executing a multi-year transformation plan. The four
strategic areas of focus of this transformation plan are as follows: improving near-term performance, including
strong cost management; repositioning our brand and improving our service and product offerings; targeting new
channel growth in healthcare; and building organizational capabilities. As part of our focus on strong cost
management, we successfully reduced our gross annualized expenses by $250 million by the end of fiscal 2015
versus our fiscal 2012 cost base. Prior to fiscal 2015, we achieved a gross cost-savings initiative totaling
$150 million annually and, in fiscal 2015, we established an incremental $100 million annual gross cost-savings
initiative, which we successfully achieved. See Note 19 of our consolidated financial statements, contained in
Part IV, Item 15 of this Annual Report on Form 10-K for additional details on this initiative. The December 2015
launch of our comprehensive program innovation, Beyond the Scale, is a key component of our strategy to
reposition our brand and improve our service and product offerings. This innovation expands our purpose from
weight loss alone to more broadly helping people lead healthier, more active, happier lives. Management is
confident that this innovation, together with our groundbreaking partnership with Ms. Winfrey, will accelerate
the successful repositioning of our brand. As part of our partnership, and in furtherance of this repositioning of
our brand, Ms. Winfrey was featured in our 2016 winter season television advertising in certain key markets. She
will also continue to be a member and may, from time to time, candidly share her experiences and perspectives
along the way of her weight loss journey. A key component of the organizational capabilities upgrade is our
technology transformation, whereby we are replacing legacy technology systems and architecture to enable us to
deliver product and program enhancements in a more agile, cost-effective manner. In fiscal 2015, we achieved
significant milestones in this arena. For additional details on our investments in fiscal 2015 related to this
technology transformation, see “—Liquidity and Capital Resources—Investing Activities—”. As we execute this
transformation plan, management, from time to time, reviews the resulting revenues and associated costs to
refine the plan in order to ensure resources are allocated efficiently and optimized. As management determines
resources should be reallocated, they refine the transformation plan accordingly. For example, our investment
strategy in the healthcare channel and related technology has evolved to focus on proving our internal capabilities
39
to deliver against healthcare market needs. Management continues to believe that the Company has sufficient
liquidity to execute the transformation plan and does not believe the Company is constrained by its capital
structure. See “— Liquidity and Capital Resources”. While the Company’s turnaround is taking longer than
management had previously anticipated, we made significant progress against this plan in fiscal 2015.
Management remains committed to this transformation plan and its underlying strategies and is optimistic about
the resulting turnaround.
Market Trends
We believe that our revenues and profitability can be sensitive to major trends in the weight management
industry. In particular, we believe that our business could be adversely impacted by:
•
•
•
•
•
•
•
•
increased competition from Internet, free mobile and other weight management apps and other
electronic weight management approaches;
the development of more effective or more favorably perceived weight management methods,
including pharmaceuticals;
a failure to develop and market new, innovative services and products or to successfully expand into
new channels of distribution or respond to consumer trends, including consumer focus on integrated
lifestyle and fitness approaches;
a failure to successfully implement new strategic initiatives;
a decrease in the effectiveness of our marketing, advertising, and social media programs;
an impairment of the Weight Watchers brand and our other intellectual property;
a failure of our technology or systems to perform as designed; and
a downturn in general economic conditions or consumer confidence.
North America Metrics and Business Trends
In fiscal 2013, North America Total Paid Weeks declined 6.6%, driven by a decline in both Meeting Paid
Weeks of 9.4% and Online Paid Weeks of 4.4%, versus the prior year. The decline in Meeting Paid Weeks
primarily resulted from the lower Incoming Active Base in the meetings business at the beginning of fiscal 2013
versus the beginning of fiscal 2012 as well as from lower enrollments in fiscal 2013 versus the prior year,
primarily in the United States, due to the difficulty in attracting members to our brand.
In fiscal 2014, North America Total Paid Weeks declined 16.8%, driven by a decline in both Online Paid
Weeks of 17.5% and Meeting Paid Weeks of 15.8%, versus the prior year. Despite the launch of the new Simple
Start program at the beginning of the year, as well as new advertising and promotional tactics, recruitment
softness continued throughout the year. The popularity of activity monitors and free apps resulted in increased
competition which exacerbated the negative trend we began to experience in fiscal 2013 in subscriptions for our
Online subscription products. In addition, the increasing focus of consumers on more integrated lifestyle and
fitness approaches rather than just food, nutrition and diet also negatively impacted our recruitments.
In fiscal 2015, North America Total Paid Weeks declined 20.9%, driven by a decline in both Online Paid
Weeks of 22.6% and Meeting Paid Weeks of 18.8%, versus the prior year. The decline in North America Total
Paid Weeks primarily resulted from the lower Incoming Active Base at the beginning of fiscal 2015 versus the
beginning of fiscal 2014 as well as from lower recruitments in fiscal 2015 versus the prior year. In response to
weakening recruitment trends in early fiscal 2015, North America introduced new advertising and promotions.
Although recruitments remained lower year-over-year in fiscal 2015, the year-over-year recruitment trend in the
second and third quarters of fiscal 2015 improved as compared to the first quarter of fiscal 2015, benefitting
from these actions. In the fourth quarter of fiscal 2015, following the announcement of our partnership with
Ms. Winfrey in October and our early December launch of our new program through the end of the fiscal 2015,
recruitments increased as compared to the same period in the prior year.
40
United Kingdom Metrics and Business Trends
In fiscal 2013, UK Total Paid Weeks declined 13.6% driven by a decline in Meeting Paid Weeks of 19.2%
and a decline in Online Paid Weeks of 2.8% versus the prior year. The decline in Meeting Paid Weeks in fiscal
2013 was driven by the lower Incoming Active Meeting Subscribers at the beginning of fiscal 2013 versus the
beginning of fiscal 2012 coupled with lower meeting recruitments in the year as compared to the prior year. In
fiscal 2013, local competition in the United Kingdom significantly contributed to the decline in meeting
recruitments.
In fiscal 2014, UK Total Paid Weeks declined 9.2% versus the prior year, driven by a decline in Meeting
Paid Weeks of 9.6% and a decline in Online Paid Weeks of 8.6% versus the prior year. Total Paid Weeks
performance in fiscal 2014 was driven by the lower Incoming Active Base at the beginning of fiscal 2014 versus
the beginning of fiscal 2013 coupled with lower recruitments in fiscal 2014 as compared to the prior year. In
response to weakening recruitment trends, early in fiscal 2014, the United Kingdom introduced new advertising,
implemented new promotional tactics and invested in a local marketing campaign to combat a strong local
competitor. As a result of these initiatives, the recruitment trend turned positive in the second half of fiscal 2014
as compared to the prior year period.
In fiscal 2015, UK Total Paid Weeks declined 14.3% versus the prior year, driven by a decline in
Meeting Paid Weeks of 13.2% and a decline in Online Paid Weeks of 16.1% versus the prior year. Total Paid
Weeks performance in fiscal 2015 was driven by the lower Incoming Active Base at the beginning of fiscal
2015 versus the beginning of fiscal 2014 coupled with lower recruitments in fiscal 2015 as compared to the
prior year. Although recruitments in fiscal 2015 remained lower year-over-year, the year-over-year
recruitment trend in the second, third and fourth quarters of fiscal 2015 in the United Kingdom improved as
compared to the first quarter of fiscal 2015 driven by the use of new promotional tactics and the new program
launch in early December 2015.
Continental Europe Metrics and Business Trends
In fiscal 2013, Continental Europe Total Paid Weeks increased 19.9%, driven primarily by an increase in
Online Paid Weeks, up 38.4%, versus the prior year. Continental Europe benefitted from an increased number of
Incoming Active Meeting Subscribers at the beginning of fiscal 2013 versus the beginning of fiscal 2012, which
was partially offset by lower recruitments in fiscal 2013 versus the prior year.
In fiscal 2014, Continental Europe Total Paid Weeks increased 3.1% driven by an increase in Online Paid
Weeks of 6.5%, partially offset by a decline in Meeting Paid Weeks of 2.5%, versus the prior year. This increase
in Online Paid Weeks was driven by the higher number of Incoming Active Online Subscribers at the start of
fiscal 2014 versus the start of fiscal 2013. The decrease in Meeting Paid Weeks was driver by a lower number of
Incoming Active Meeting Subscribers at the start of fiscal 2014 versus the start of fiscal 2013 and recruitment
declines. Although Total Paid Weeks continued to grow in fiscal 2014, it reflected a significant slowdown in the
year-over-year trend.
In fiscal 2015, Continental Europe Total Paid Weeks declined 8.0% versus the prior year, driven by a
decline in Meeting Paid Weeks of 9.8% and a decline in Online Paid Weeks of 6.9% versus the prior year. This
decline in Meeting Paid Weeks was driven by the lower number of Incoming Active Meeting Subscribers at the
start of fiscal 2015 versus the start of fiscal 2014 coupled with lower meeting recruitments in fiscal 2015 as
compared to the prior year. Although the number of Incoming Active Online Subscribers at the start of fiscal
2015 was higher than at the start of fiscal 2014, recruitment softness in the year led to this decline in Online Paid
Weeks compared to the prior year. Although recruitments in fiscal 2015 remained lower year-over-year, the year-
over-year recruitment trend in the second, third and fourth quarters of fiscal 2015 in Continental Europe
improved as compared to the first quarter of fiscal 2015 driven by the use of new promotional tactics and the new
program launch in early December 2015.
41
Fiscal 2016: Anticipated Business Metrics, Trends and Other Events
We expect that our fiscal 2016 revenues will increase as compared to fiscal 2015, driven by anticipated
recruitments that will establish a strong foundation for revenue growth and increased profitability in fiscal 2016.
Given the nature of our subscription-based payment model, revenue growth typically lags recruitment growth.
We expect an increase in revenues despite the approximately $20.0 million negative impact of the lower fiscal
2016 Incoming Active Base versus the prior year and an anticipated $16.0 million negative impact of foreign
currency on fiscal 2016 revenues based on current rates. We plan to use cash on hand to repay in full our
$144.3 million debt obligations due April 2016 under the WWI Credit Facilities.
Non-GAAP Financial Measures
To supplement our consolidated results presented in accordance with accounting principles generally
accepted in the United States, or GAAP, we have disclosed non-GAAP financial measures of operating results
that exclude or adjust certain items. Gross profit and gross profit margin, operating income and operating
income margin, net income attributable to the Company, selling, general and administrative expenses and
earnings per fully diluted share, including components thereof, are discussed in this Annual Report on Form
10-K both as reported (on a GAAP basis) and as adjusted (on a non-GAAP basis), as applicable, as follows:
(i) with respect to fiscal 2015 and 2014 to exclude the impact of charges associated with our previously
disclosed plans to restructure our organization; (ii) with respect to fiscal 2015 to exclude the impact of
(a) expenses associated with the Winfrey Transaction and (b) the gains on early extinguishment of debt
associated with our previously reported debt prepayments in the period; (iii) with respect to fiscal 2014 to
exclude the impact of (a) the net tax benefit related to an intercompany loan write-off in connection with the
closure of our China business and the establishment of a valuation allowance related to tax benefits for foreign
losses that are not expected to be realized and (b) the gain recognized in connection with our previously
disclosed Brazil acquisition due to an adjustment of our previously held equity interest to fair value offset by a
charge associated with the settlement of the royalty-free arrangement of the Brazil partnership; and (iv) with
respect to fiscal 2013 to exclude the early extinguishment of debt charge. Income before taxes, effective tax
rate, net income attributable to the Company and earnings per fully diluted share are discussed in this Annual
Report on Form 10-K both as reported (on a GAAP basis) and as adjusted (on a non-GAAP basis) to exclude
from fiscal 2013 the impact from the early extinguishment of debt charge recorded in connection with our
previously announced April 2, 2013 refinancing of our long-term debt. We generally refer to such non-GAAP
measures as excluding or adjusting for the impact of the expenses associated with the Winfrey Transaction, the
restructuring charges, the gain on the early extinguishment of debt, the gain on the Brazil acquisition, the
China tax benefit partially offset by the recognition of a valuation allowance and the early extinguishment of
debt charge. Our management believes these non-GAAP financial measures provide supplemental information
to investors regarding the performance of our business and are useful for period-over-period comparisons of
the performance of our business. While we believe that these financial measures are useful in evaluating our
business, this information should be considered as supplemental in nature and is not meant to be considered in
isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition,
these non-GAAP financial measures may not be the same as similarly entitled measures reported by other
companies.
Use of Constant Currency
As exchange rates are an important factor in understanding period-to-period comparisons, we believe in
certain cases the presentation of results on a constant currency basis in addition to reported results helps improve
investors’ ability to understand our operating results and evaluate our performance in comparison to prior
periods. Constant currency information compares results between periods as if exchange rates had remained
constant period-over-period. 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 using prior-year foreign currency exchange rates. We generally refer to such amounts calculated on a
42
constant currency basis as excluding or adjusting for the impact of foreign currency or being on a constant
currency basis. These results should be considered in addition to, not as a substitute for, results reported in
accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to
similarly titled measures used by other companies and are not measures of performance presented in accordance
with GAAP.
Critical Accounting Policies
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based upon
our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of
these financial statements requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis,
we evaluate our estimates and judgments, including those related to inventories, the impairment analysis for
goodwill and other indefinite-lived intangible assets, share-based compensation, income taxes, tax contingencies
and litigation. We base our estimates on historical experience and on various other factors and assumptions that
we believe to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates.
We believe the following accounting policies are most important to the portrayal of our financial condition
and results of operations and require our most significant judgments and estimates.
Revenue Recognition
We earn revenue by conducting meetings, for which we charge a fee, predominantly through monthly
commitment plans, prepayment plans or the “pay-as-you-go” arrangement. We also earn revenue from monthly
subscriptions for our Online products, selling products in our meetings, on the Internet and to our franchisees,
collecting commissions from franchisees, collecting royalties related to licensing agreements, selling magazine
subscriptions, selling advertising space on our website and in copies of our magazines, ecommerce fees and By
Mail product sales.
Monthly commitment plans, prepaid meeting fees and magazine subscription revenue is recorded to
deferred revenue and amortized into revenue over the period earned. Online Subscription Revenues are
recognized over the period that products are provided. One-time sign-up fees are deferred and recognized over
the expected customer relationship period. Online Subscription Revenues that are paid in advance are deferred
and recognized on a straight-line basis over the subscription period. Revenue from “pay-as-you-go” meeting fees,
product sales, ecommerce fees, By Mail, commissions and royalties is recognized when services are rendered,
products are shipped to customers and title and risk of loss pass to the customers, and commissions and royalties
are earned, respectively. Revenue from advertising in magazines is recognized when advertisements are
published. Revenue from magazine sales is recognized when the magazine is sent to the customer. We generally
charge non-refundable registration and starter fees in exchange for an introductory information session and
materials we provide to new members in our meetings business. Revenue from these registration and starter fees
are recognized when the service and products are provided, which is generally at the same time payment is
received from the customer. Discounts to customers, including free registration offers, are recorded as a
deduction from gross revenue in the period such revenue was recognized. Revenue from advertising on our
website is recognized when the advertisement is viewed by the user.
We grant refunds in aggregate amounts that historically have not been material. Because the period of
payment of the refund generally approximates the period revenue was originally recognized, refunds are recorded
as a reduction of revenue when paid.
43
Goodwill, Franchise Rights Acquired, and Other Intangible Assets
Finite-lived intangible assets are amortized using the straight-line method over their estimated useful lives
of 3 to 20 years or, in the case of amortizable franchise rights acquired, over the remaining contractual period,
which is generally less than one year.
We review goodwill and other indefinite-lived intangible assets, including franchise rights acquired with
indefinite lives, for potential impairment on at least an annual basis or more often if events so require. In
performing our goodwill impairment analysis for fiscal 2015, 2014 and 2013, no impairment was identified for
any of our reporting units as the fair value of those units exceeded their carrying value. In performing the
impairment analysis for fiscal 2015 and fiscal 2014, we determined that the carrying amounts of our franchise
rights acquired with indefinite lives did not exceed their respective fair values and therefore, no impairment
existed. In performing the impairment analysis for fiscal 2013, we determined that, based on the fair values
calculated, the carrying amounts of the indefinite-lived franchise rights acquired related to our Mexico and
Hong Kong operations exceeded their respective fair values and recorded impairment charges of $0.9 million and
$0.2 million, respectively. We determined that the carrying amounts of the remainder of our franchise rights
acquired with indefinite lives did not exceed their respective fair values as of the end of fiscal 2013, and
therefore, no other impairment existed.
Although there is generally significant headroom in our impairment analysis (except for Brazil as discussed
below), a change in the underlying assumptions will cause a change in the results of the tests and, as such, could
result in an impairment of those assets, which would impact earnings. We would also be required to reduce the
carrying amounts of the related assets on our balance sheet. We continue to evaluate these estimates and
assumptions and believe that these assumptions are appropriate.
In performing our annual impairment analysis, we also considered the trading value of both our equity and
debt. We continue to believe that these trading values do not reflect the anticipated positive impact of our
transformation plan. For additional information on our transformation plan, see “—Transformation Plan”.
However, if our transformation plan does not meet our expectations, or the trading values of both our equity and
debt were to significantly decline from their current levels, we may have to take an impairment charge at the
appropriate time, which could be material. For additional information on risks associated with our recognizing
asset impairment charges, see “Item 1A. Risk Factors”.
The following is a more detailed discussion of our goodwill and franchise rights acquired impairment
analysis.
Goodwill
In performing the impairment analysis for goodwill, the fair value for our reporting units is estimated using
a discounted cash flow approach. This approach involves projecting future cash flows attributable to the
reporting unit and discounting those estimated cash flows using an appropriate discount rate. The estimated fair
value is then compared to the carrying value of the reporting unit. We have determined the appropriate reporting
unit for purposes of assessing annual impairment to be the country for all reporting units. The values of goodwill
in the United States, Canada, Brazil and other countries at January 2, 2016 were $94.8 million, $38.6 million,
$15.9 million and $10.0 million, respectively.
Based on the results of our fiscal 2015 impairment analysis, we estimated that approximately 90% of our
reporting units had a fair value at least 50% higher than the respective reporting unit’s carrying amount. In
Brazil, which holds 10% of the Company’s goodwill, the fair value of this reporting unit exceeded its carrying
value by approximately 20%.
44
For all of the Company’s reporting units except for Brazil (see below), we estimated future cash flows by
utilizing the historical debt-free cash flows attributable to that country and then applied expected future operating
income growth rates for such country. We utilized operating income as the basis for measuring our potential
growth because we believe it is the best indicator of the performance of our business. We then discounted the
estimated future cash flows utilizing a discount rate which was calculated using the average cost of capital, which
includes the cost of equity and the cost of debt. The cost of equity was determined by combining a risk-free rate
of return and a market risk premium for the Company’s peer group. The risk-free rate of return was generally
determined based on the average rate of long-term U.S. Treasury securities. The market risk premium was
generally determined by reviewing external market data. The cost of debt was determined by estimating the
Company’s current borrowing rate.
The following are the more significant assumptions utilized in our impairment analysis for fiscal 2015 and
2014:
January 2,
2016
January 3,
2015
Debt-Free Cash Flow Growth Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discount Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0% to 6% -5% to 14%
10.3%
9.3%
As it relates to our impairment analysis for Brazil, we estimated future debt free cash flows in contemplation
of our growth strategies for that market. In developing these projections, we considered the historical impact of
similar growth strategies in other markets as well as the current market conditions in Brazil. We then discounted
the estimated future cash flows utilizing a discount rate which was calculated using the average cost of capital,
which included the cost of equity and the cost of debt. The cost of equity was determined by combining a risk-
free rate of return and a market risk premium for the Company’s peer group. The risk-free rate of return was
generally determined based on the average rate of long-term U.S. Treasury securities. The market risk premium
was generally determined by reviewing external market data. Additional consideration was given to the current
economic conditions in Brazil and the country specific risk thereon, as well as the risk associated with the rate of
growth projected in the analysis. The cost of debt was determined by estimating the Company’s current
borrowing rate. Accordingly, in our fiscal 2015 impairment analysis, we assumed a cumulative annual growth
rate for our debt-free cash flows of 51% and a discount rate of 17.8%.
Franchise Rights Acquired
In performing the impairment analysis for our indefinite-lived franchise rights acquired, the fair value for
our franchise rights acquired is estimated using a discounted cash flow approach referred to as the hypothetical
start-up approach for our franchise rights related to our meetings business and a relief from royalty methodology
for our franchise rights related to our Online business. The aggregate estimated fair value for these rights is then
compared to the carrying value of the unit of accounting for those franchise rights. We have determined the
appropriate unit of account for purposes of assessing annual impairment to be the combination of the rights in the
meetings and Online businesses in the country in which the acquisitions have occurred. The values of these
franchise rights in the United States, Canada, United Kingdom, Australia, New Zealand and other countries at
January 2, 2016 were $675.6 million, $48.4 million, $11.8 million, $6.6 million, $4.8 million, and $0.1 million,
respectively.
Based on the results of our fiscal 2015 impairment analysis, we estimated that approximately 99% of our
franchise rights acquired had a fair value at least 50% higher than their carrying amount.
In our hypothetical start-up approach analysis for fiscal 2015 we assumed that the year of maturity was
reached after 7 years. Subsequent to the year of maturity, we assumed debt-free cash flow growth rates based on
our expected future operating income growth rates for such country. We utilized operating income as the basis
45
for measuring our potential growth because we believe it is the best indicator of the performance of our business.
We then discounted the estimated future cash flows utilizing discount rates consistent with those used in our
goodwill impairment analysis as discussed above.
For fiscal 2015, the compound annual growth rates of our debt-free cash flows subsequent to the year of
maturity used in our discounted cash flow analysis ranged from a decline of approximately 24% to growth of
approximately 21%. For fiscal 2014, the compound annual growth rates subsequent to the year of maturity used
in our discounted cash flow analysis ranged from a decline of approximately 9% to growth of approximately
16%.
Information concerning significant accounting policies affecting us is set forth in Note 2 of our consolidated
financial statements, contained in Part IV, Item 15 of this Annual Report on Form 10-K.
46
RESULTS OF OPERATIONS FOR FISCAL 2015 (52 weeks) COMPARED TO FISCAL 2014 (53 weeks)
The Company’s fiscal year ends on the Saturday closest to December 31st and consists of either 52- or 53-
week periods. Fiscal 2015 contained 52 weeks, while fiscal 2014 contained 53 weeks. The 2014 1st week, which
began on December 30, 2013 and ended January 5, 2014, contributed an additional $19.2 million in net revenues,
or 1.3%, and additional operating income of $3.9 million, or 1.3%, to fiscal 2014. It also contributed 1.3 million,
or 1.7%, of additional Meeting Paid Weeks, 1.8 million, or 1.8%, of additional Online Paid Weeks, and
3.1 million, or 1.8%, in additional Total Paid Weeks to fiscal 2014. The additional week in fiscal 2014 also
resulted in an additional week of interest expense for that year.
The table below sets forth selected financial information for fiscal 2015 from our consolidated statements of
net income for fiscal 2015 versus selected financial information for fiscal 2014 from our consolidated statements
of net income for fiscal 2014.
Summary of Selected Financial Data
(In millions, except per share amounts)
Fiscal
2015
Fiscal
2014
Increase/
(Decrease)
%
Change
% Change
Constant Currency
Revenues, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . .
$1,164.4
590.3
$1,479.9
677.4
$(315.5)
(87.0)
(21.3%)
(12.8%)
Gross profit . . . . . . . . . . . . . . . . . . . . . . . .
Gross Margin % . . . . . . . . . . . . . . . . . . . .
Marketing expenses . . . . . . . . . . . . . . . . . . . . .
Selling, general & administrative expenses . . .
Operating income . . . . . . . . . . . . . . . . . . .
Operating Income Margin % . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Other expense, net
Gain on Brazil acquisition . . . . . . . . . . . . . . . .
Early extinguishment of debt . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to the noncontrolling
interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Weight
574.1
49.3%
201.0
205.0
168.1
14.4%
121.8
2.0
—
(11.4)
55.6
22.8
32.8
0.2
802.6
54.2%
262.3
241.0
299.3
20.2%
123.0
3.2
(10.5)
—
183.7
65.9
117.7
(228.5)
(28.5%)
(61.2)
(36.0)
(23.3%)
(14.9%)
(131.3)
(43.9%)
(1.1)
(1.2)
10.5
(11.4)
(128.1)
(43.1)
(0.9%)
(36.8%)
(100.0%)
—
(69.7%)
(65.4%)
(85.0)
(72.2%)
0.1
0.1
207.4%
100.0%
Watchers International, Inc. . . . . . . . . .
$
32.9
$ 117.8
$ (84.8)
(72.0%)
(62.8%)
Weighted average diluted shares
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . .
59.0
56.7
2.3
4.0%
4.0%
Diluted Earnings Per Share . . . . . . . . . . . . . . .
$
0.56
$
2.08
$ (1.52)
(73.1%)
(72.8%)
Note: Totals may not sum due to rounding.
Certain results for fiscal 2015 are adjusted to exclude the impact of the $8.4 million of restructuring charges
associated with our previously disclosed 2015 restructuring plan, the $13.6 million of expenses associated with
the Winfrey Transaction, which includes $12.8 million of stock compensation related to the Winfrey Option,
and the gain on early extinguishment of debt $11.4 million. See “Non-GAAP Financial Measures” above. The
47
(16.3%)
(7.9%)
(23.4%)
(18.1%)
(11.4%)
(37.6%)
(0.9%)
51.3%
—
—
(59.5%)
(53.7%)
(62.6%)
table below sets forth a reconciliation of certain of those components of our selected financial data for the fiscal
year ended January 2, 2016 which have been adjusted.
(in millions, except per share amounts)
Fiscal 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to Reported Amounts(1)
. . . . . . . . . . .
2015 Restructuring charges(1)
. . . . . . . .
Winfrey Transaction Expenses(1)
Early extinguishment of debt(1) . . . . . . . . . .
Total Adjustments . . . . . . . . . . . . . . . .
Gross
Profit
Gross
Profit
Margin
Operating
Income
Operating
Income
Margin
Net Income
Attributable to
Company
$574.1
49.3% $168.1
14.4%
$32.9
1.5
—
—
1.5
8.4
13.6
—
22.0
5.1
8.3
(7.0)
6.5
Diluted
EPS
$ 0.56
0.09
0.14
(0.12)
0.1
Fiscal 2015, as adjusted(1) . . . . . . . . . . . . . . . . .
$575.6
49.4% $190.1
16.3%
$39.4
$ 0.67
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 to exclude the
impact of the $8.4 million ($5.1 million after tax) of restructuring charges associated with our previously disclosed 2015 restructuring
plan, the $13.6 million ($8.3 million after tax) of expenses associated with the Winfrey Transaction, which includes $12.8 million of
stock compensation related to the Winfrey Option, and the gain on early extinguishment of debt of $11.4 million ($7.0 million after tax).
See “Non-GAAP Financials Measures” above for an explanation of our use of non-GAAP financial measures.
Certain results for fiscal 2014 are adjusted to exclude the $11.8 million impact of charges from the
previously disclosed 2014 restructuring plan, $10.5 million related to the gain on the Brazil acquisition and the
$2.4 million net tax benefit related to an intercompany loan write-off in connection with the closure of our China
business partially offset by the recognition of a valuation allowance related to tax benefits for foreign losses that
are not expected to be realized. See “Non-GAAP Financial Measures” above. The table below sets forth a
reconciliation of certain of those components of our selected financial data for the fiscal year ended January 3,
2015 which have been adjusted.
(in millions, except per share amounts)
Fiscal 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to Reported Amounts(1)
2014 Restructuring charges(1)
Gain on Brazil acquisition(1)
Tax benefit, net(1)
. . . . . . . . . . .
. . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Total Adjustments . . . . . . . . . . . . . . . .
Gross
Profit
Gross
Profit
Margin
Operating
Income
Operating
Income
Margin
Net Income
Attributable to
Company
$802.6
54.2% $299.3
20.2%
$117.8
4.6
—
—
4.6
11.8
—
—
11.8
7.2
(6.4)
(2.4)
(1.5)
Diluted
EPS
$ 2.08
0.13
(0.11)
(0.04)
0.03
Fiscal 2014, as adjusted(1) . . . . . . . . . . . . . . . . .
$807.2
54.5% $311.1
21.0%
$116.3
$ 2.05
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 2014 to exclude the
impact of the $11.8 million ($7.2 million after tax) of restructuring charges associated with our previously disclosed 2014 restructuring
plan, the gain of $10.5 million ($6.4 million after tax) recognized in connection with our previously disclosed Brazil acquisition due to an
adjustment to our previously held equity interest to fair value offset by a charge associated with the settlement of the royalty-free
arrangement of the Brazilian partnership and the impact of the $2.4 million net tax benefit associated with an intercompany loan write-
off in connection with the closure of our China business partially offset by the recognition of a valuation allowance related to tax benefits
for foreign losses that are not expected to be realized. See “Non-GAAP Financials Measures” above for an explanation of our use of non-
GAAP financial measures.
Consolidated Results
Revenues
Revenues in fiscal 2015 declined by 21.3% versus fiscal 2014 driven by revenue declines in the meetings
and Online businesses globally, particularly in North America. Excluding the impact of foreign currency, which
48
negatively impacted our revenues for fiscal 2015 by $74.4 million, revenues in fiscal 2015 would have declined
16.3% versus fiscal 2014. See “—Segment Results” for additional details on revenues.
Cost of Revenues and Gross Profit
Total cost of revenues in fiscal 2015 declined $ 87.0 million, or 12.8%, versus the prior year. Excluding the
impact of the 2015 and 2014 restructuring charges from fiscal 2015 and fiscal 2014, as applicable, total cost of
revenues in fiscal 2015 would have declined $83.9 million, or 12.5%, versus the prior year. Gross profit for fiscal
2015 declined $228.5, million or 28.5%, versus the prior year. Excluding the impact of the 2015 and 2014
restructuring charges, gross profit for fiscal 2015 would have decreased by $231.6 million, or 28.7%, from fiscal
2014. Excluding the impact of foreign currency, which negatively impacted our gross profit for fiscal 2015 by
$40.9 million, gross profit in fiscal 2015 would have decreased 23.4% versus fiscal 2014. Excluding the impact
of the 2015 and 2014 restructuring charges, gross margin in fiscal 2015 would have been 49.4% as compared to
gross margin of 54.5% in fiscal 2014. Gross margin compression was driven primarily by the decline in the
North America gross margin. The decline in North America gross margin was driven primarily by fixed cost
deleverage, and the impact of costs to support 24/7 Expert Chat and technology cost in support of our strategic
initiatives. See “—Transformation Plan” for a discussion of our strategic initiatives.
Marketing
Marketing expenses for fiscal 2015 decreased $61.2 million, or 23.3%, versus fiscal 2014. Excluding the
impact of foreign currency, which decreased marketing expenses for fiscal 2015 by $13.7 million, marketing
expenses in fiscal 2015 would have declined 18.1% versus fiscal 2014. The decline in marketing expense was
primarily driven by lower TV media and production costs globally as well as lower agency fees and celebrity and
talent costs primarily in the United States. Marketing expenses as a percentage of revenue were 17.3% in fiscal
2015 as compared to 17.7% in the prior year.
Selling, General and Administrative
Selling, general and administrative expenses for fiscal 2015 decreased $36.0 million, or 14.9%, versus fiscal
2014. Excluding the impact of foreign currency, which decreased selling, general and administrative expenses for
fiscal 2015 by $8.5 million, selling, general and administrative expenses in fiscal 2015 would have declined
11.4% versus fiscal 2014. Excluding the impact of restructuring charges from fiscal 2015 and the expenses
associated with the Winfrey Transaction, and excluding the impact of restructuring charges from fiscal 2014,
selling, general and administrative expenses for fiscal 2015 would have decreased by 21.1%, or 17.5% on a
constant currency basis, versus fiscal 2014. In fiscal 2015, the Company continued its concerted efforts to reduce
costs and continued to invest in certain strategic initiatives during fiscal 2015 which partially offset its reduced
costs. See “—Transformation Plan” for a discussion of our strategic initiatives. Selling, general and
administrative expenses as a percentage of revenue for fiscal 2015 increased to 17.6% from 16.3% for fiscal
2014. Excluding the impact of restructuring charges and the expenses associated with the Winfrey Transaction
from fiscal 2015, and excluding the impact of restructuring charges from fiscal 2014, on a constant currency
basis, selling, general and administrative expenses as a percentage of revenue for fiscal 2015 would have been
15.6% as compared to 15.8% for fiscal 2014.
Operating Income
Operating income for fiscal 2015 decreased $131.3 million, or 43.9%, versus fiscal 2014. Excluding the
impact of foreign currency, which negatively impacted operating income for fiscal 2015 by $18.7 million,
operating income in fiscal 2015 would have declined 37.6% versus the prior fiscal year. This decrease in
operating income was predominately the result of lower operating income from North America in fiscal 2015 as
compared to the prior year. Excluding the impact of restructuring charges and the expenses associated with the
Winfrey Transaction from fiscal 2015, and excluding the impact of restructuring charges from fiscal 2014, our
49
operating income margin in fiscal 2015 would have decreased to 16.3%, or 16.9% on a constant currency basis,
from 21.0% in fiscal 2014. This decline in operating income margin was driven by the decline in gross margin,
partially offset by the decline in marketing and selling, general and administrative expenses as a percentage of
revenue as compared to the prior year.
Interest Expense
Interest expense in fiscal 2015 decreased $1.1 million, or 0.9%, versus fiscal 2014, which had an additional
week of interest expense of approximately $2.3 million as discussed above. Excluding this additional week of
interest expense from fiscal 2014, interest expense in fiscal 2015 would have increased by $1.1 million, or 0.9%,
versus the prior year. This increase in interest expense was driven primarily by the full year impact of the $1.5
billion interest rate swap which became effective on March 31, 2014, the difference in the notional amount of our
interest rate swaps in effect during fiscal 2015 versus the prior year and the interest associated with the revolver
borrowing drawn down on July 14, 2015. This increase in interest expense was offset in part by the decrease in
our average debt outstanding and a decline of $2.4 million in deferred financing costs which includes cycling
against the write-off of $1.6 million recorded in connection with the reduction in the amount of the Revolving
Facility from $250.0 million to $50.0 million as well as lower costs associated with lower debt. Our average debt
outstanding decreased by $95.9 million to $2,277.0 million in fiscal 2015 from $2,372.9 million in fiscal 2014.
This decrease was primarily due to our debt prepayments in March and June 2015. The effective interest rate on
our debt, based on interest incurred and our average borrowings during fiscal 2015 and 2014 and excluding the
impact of our interest rate swaps, increased by 0.12% per annum to 3.98% per annum at fiscal 2015 year end
from 3.86% per annum at fiscal 2014 year end. Including the impact of our interest rate swaps, our effective
interest rate on our debt, based on interest incurred and our average borrowings during fiscal 2015 and 2014,
increased to 5.07% per annum at fiscal 2015 year end from 4.67% per annum at fiscal 2014 year end. See “—
Liquidity and Capital Resources—Long-Term Debt” for additional details regarding interest rates on our debt
outstanding, the amendment to our Revolving Facility and our debt prepayments. For additional details on our
interest rate swap, see “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in Part III of this
Annual Report on Form 10-K.
Early Extinguishments of Debt
In March 2015, we paid an aggregate amount of cash proceeds totaling $57.4 million plus an amount sufficient
to pay accrued and unpaid interest on the amount prepaid to prepay $63.1 million in aggregate principal amount of
term loans under the Tranche B-1 Term Facility. In June 2015, we paid an aggregate amount of cash proceeds
totaling $77.2 million plus an amount sufficient to pay accrued and unpaid interest on the amount prepaid to prepay
$84.9 million in aggregate principal amount of term loans under the Tranche B-1 Term Facility. As a result of these
prepayments, we wrote-off fees of $0.6 million, incurred fees of $1.2 million and recorded a gain on early
extinguishment of debt of $11.4 million, inclusive of these fees, in fiscal 2015.
Gain on Brazil Acquisition
In March 2014, we acquired an additional 45% equity interest in our Brazilian partnership thereby
increasing our equity interest to 80%. As a result of this transaction, we adjusted our previously held equity
interest to fair value and recorded a charge associated with the settlement of the royalty-free arrangement of our
Brazilian partnership. The net effect of these items resulted in us recognizing a pre-tax gain of $10.5 million in
fiscal 2014.
Other Expense, Net
Other expense, net, which consists of the impact of foreign currency on intercompany transactions,
decreased by $1.2 million in fiscal 2015 versus the prior year.
50
Tax
Our effective tax rate was 41.1% for fiscal 2015 as compared to 35.9% for fiscal 2014. This increase in effective
tax rate was driven by increases in our net tax expense in fiscal 2015 associated with an increase in Federal and state
tax reserves and the write-off of a deferred tax asset related to inventory reserves. This increase in net tax expense was
offset by a decrease in net tax expense due to the change in the valuation allowance related to tax benefits for foreign
losses that are not expected to be realized.
Net Income Attributable to the Company and Earnings Per Share
Net income attributable to the Company in fiscal 2015 reflected an $84.9 million, or 72.1%, decline from net
income attributable to the Company in fiscal 2014. Excluding the impact of foreign currency, which negatively
impacted net income attributable to the Company in fiscal 2015 by $11.0 million, net income attributable to the
Company in fiscal 2015 would have declined by 62.8% versus the prior year. Excluding the impact of restructuring
charges, expenses associated with the Winfrey Transaction and the gain on the early extinguishment of debt from fiscal
2015 and the impact of restructuring charges, the gain on the Brazil acquisition, and the China tax benefit partially
offset by the recognition of a valuation allowance from fiscal 2014, net income attributable to the Company in fiscal
2015 would have declined 66.1%, or 56.6% on a constant currency basis, from net income attributable to the Company
in fiscal 2014. This decline in net income attributable to the Company was primarily driven by the decrease in
operating income in fiscal 2015 versus the prior year.
Earnings per fully diluted share, or EPS, in fiscal 2015 was $0.56. Excluding the impact of restructuring charges,
expenses associated with the Winfrey Transaction and the gain on the early extinguishment of debt from fiscal 2015
and the impact of restructuring charges, the gain on the Brazil acquisition, and the China tax benefit partially offset by
the recognition of a valuation allowance from fiscal 2014, EPS would have been $0.67 in fiscal 2015 as compared to
$2.05 in the prior year. Foreign currency had a negative $0.19 impact on EPS in fiscal 2015. In addition, fiscal 2015
EPS was negatively impacted by $0.02 due to the increased share count resulting from Ms. Winfrey’s equity
investment in the Company and the related Winfrey Option.
Segment Results
Metrics and Business Trends
The following tables set forth key metrics by reportable segment for fiscal 2015 and the percentage change in
those metrics versus the prior year:
(in millions unless otherwise stated)
GAAP
Product
Sales &
Other
Service
Revenues
Fiscal 2015
Constant Currency
Total
Revenues
Service
Revenues
Product
Sales &
Other
Total
Revenues
Total
Paid
Weeks
Incoming
Active
Base
EOP
Active
Base
North America . . . . . . . . . . . . . . . . . . . $639.4 $116.0 $ 755.4 $647.0 $116.9 $ 763.9
134.8
87.6
UK . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
274.4
176.1
CE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1)
65.8
34.3
. . . . . . . . . . . . . . . . . . . . . . . . .
94.6
211.1
42.5
124.8
229.1
55.1
40.2
63.3
23.2
37.2
53.0
20.8
(in thousands)
92.6 1,617.8 1,531.5
263.1
277.8
17.3
530.7
551.9
32.8
64.3
62.1
4.3
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . $937.4 $227.1 $1,164.4 $995.3 $243.6 $1,238.8 147.0 2,509.5 2,389.6
North America . . . . . . . . . . . . . . . . . . . .
UK . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-19.5% -24.3% -20.3% -19.1% -24.0% -19.9% -20.9% -21.7% -5.3%
-19.4% -22.8% -20.4% -7.9% -11.7% -9.1% -14.3% -6.6% -5.3%
-23.7% -22.0% -23.3% -8.4% -6.3% -7.9% -8.0% 4.4% -3.8%
-28.6% -26.9% -27.9% -15.9% -20.9% -17.7% -11.0% -12.6% 3.7%
-20.7% -23.8% -21.3% -15.9% -17.8% -16.3% -17.3% -15.3% -4.8%
% Change Fiscal 2015 vs. Fiscal 2014
Note: Totals may not sum due to rounding
(1) Represents Asia Pacific and emerging markets operations and franchise revenues.
51
(in millions unless otherwise stated)
Fiscal 2015
Meeting Fees
GAAP
Constant
Currency
Meeting
Paid
Weeks
Incoming
Active
Meeting
Subscribers
EOP
Active
Meeting
Subscribers
Online Subscription
Revenues
GAAP
Constant
Currency
Online
Paid
Weeks
Incoming
Active
Online
Subscribers
EOP
Active
Online
Subscribers
North America . . . . . . . . . . . . . . . . . . $399.5 $404.3 40.8
65.1
UK . . . . . . . . . . . . . . . . . . . . . . . . . . .
70.3 10.7
99.4 118.6 11.6
CE . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1) . . . . . . . . . . . . . . . . . . . . . . . .
2.4
29.8
23.8
(in thousands)
692.6
158.1
178.2
26.4
645.1
153.2
172.4
27.2
$239.9 $242.7 51.7
24.2
6.6
92.5 21.2
1.9
12.7
22.4
76.7
10.5
(in thousands)
925.2
119.7
373.6
35.6
886.4
109.9
358.3
37.2
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $587.8 $623.1 65.5
1,055.4
997.9
$349.6 $372.1 81.4 1,454.1
1,391.8
North America . . . . . . . . . . . . . . . .
UK . . . . . . . . . . . . . . . . . . . . . . . . .
CE . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1) . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . .
-19.5% -19.0% -18.9% -16.9% -6.9% -19.6% -19.2% -22.6% -25.0% -4.2%
-19.4% -7.9% -13.5% -4.7% -3.1% -19.5% -8.1% -15.9% -8.9% -8.2%
-25.5% -10.8% -9.6% -2.9% -3.3% -21.2% -5.2% -7.0% 8.4% -4.1%
-30.3% -16.2% -11.4% -22.0% 2.8% -24.3% -15.1% -11.5% -4.1% 4.4%
-21.1% -16.3% -16.2% -13.3% -5.4% -20.1% -15.2% -18.3% -16.7% -4.3%
% Change Fiscal 2015 vs. Fiscal 2014
Note: Totals may not sum due to rounding
(1) Represents Asia Pacific and emerging markets operations and franchise revenues.
North America Performance
The decline in North America revenues in fiscal 2015 versus the prior year was driven primarily by the decline in
Service Revenues. The decline in North America Total Paid Weeks primarily resulted from the lower Incoming Active
Base at the beginning of fiscal 2015 versus the beginning of fiscal 2014 as well as from lower recruitments in fiscal
2015 versus the prior year. In response to weakening recruitment trends in early fiscal 2015, North America introduced
new advertising and promotions which benefitted year-over-year recruitment trends in both the second and third
quarters of fiscal 2015. In the fourth quarter of fiscal 2015, following the announcement of our partnership with
Ms. Winfrey in October and our early December launch of our new program through the end of fiscal 2015,
recruitments increased as compared to the same period in the prior year.
The decline in North America product sales and other in fiscal 2015 versus the prior year was driven primarily by
a decline in in-meeting product sales and to a lesser extent a decline in licensing revenue. In fiscal 2015, in-meeting
product sales of $64.8 million decreased by $20.4 million, or 23.9%, versus the prior year. This decrease resulted
primarily from a 17.5% attendance decline in fiscal 2015 as compared to the prior year. In-meeting product sales per
attendee decreased by 7.7%, or 6.8% on a constant currency basis, in fiscal 2015 versus the prior year, driven primarily
by a decline in sales across most product categories. Licensing revenue of $27.5 million declined $9.7 million, or
26.1%, from $37.2 million in the prior year.
United Kingdom Performance
The decline in UK revenues in fiscal 2015 versus the prior year was driven primarily by the decline in Service
Revenues. The decline in UK Total Paid Weeks was driven by the lower Incoming Active Base at the beginning of
fiscal 2015 versus the beginning of fiscal 2014 coupled with lower recruitments in fiscal 2015 as compared to the prior
year. Recruitments in the UK Online business increased in fiscal 2015 as compared to fiscal 2014 driven by the use of
new promotional tactics.
The decline in UK product sales and other in fiscal 2015 versus the prior year was driven by both the decline in
in-meeting product sales and the decline in licensing revenue. In fiscal 2015, in-meeting product sales of $23.8 million
decreased by $6.4 million, or 21.1%, versus fiscal 2014. Excluding the impact of foreign currency, which negatively
impacted in-meeting product sales for fiscal 2015 by $2.0 million, in-meeting product
52
sales in fiscal 2015 would have declined 14.6% versus the prior year. This decrease resulted primarily from a
14.4% attendance decline in fiscal 2015 as compared to fiscal 2014. In-meeting product sales per attendee
decreased by 7.8%, but decreased a minimal 0.1% on a constant currency basis, in fiscal 2015 versus the prior
year. Licensing revenue of $12.0 million declined $3.9 million, or 24.3%, or 18.5% on a constant currency basis,
from $15.8 million in the prior year.
Continental Europe Performance
The decline in Continental Europe revenues in fiscal 2015 versus the prior year was driven primarily by the
decline in Service Revenues. The decrease in Continental Europe Service Revenues in fiscal 2015 versus the
prior year was primarily the result of a decrease in Meeting Fees and to a lesser extent by a decrease in Online
Subscriptions Revenues. This decrease in Meeting Fees was driven by the lower Incoming Active Base at the
beginning of fiscal 2015 versus the beginning of fiscal 2014 coupled with lower recruitments in fiscal 2015 as
compared to the prior year. Although lower recruitments in the CE Online business in fiscal 2015 versus the prior
year negatively impacted Online Paid Weeks, the higher number of Incoming Active Online Subscribers at the
start of fiscal 2015 versus the start of fiscal 2014 benefitted Online Subscription Revenues in fiscal 2015.
Continental Europe product sales and other in fiscal 2015 was driven primarily by a decline in in-meeting
product sales. In-meeting product sales of $34.2 million decreased by $12.1 million, or 26.1%, versus fiscal
2014. Excluding the impact of foreign currency, which negatively impacted in-meeting product sales for fiscal
2015 by $6.9 million, in-meeting product sales in fiscal 2015 would have declined 11.2% versus the prior year.
This decrease resulted primarily from a 13.3% attendance decline in fiscal 2015 as compared to fiscal 2014. In-
meeting product sales per attendee decreased by 14.8%, but increased by 2.4% on a constant currency basis, in
fiscal 2015 versus the prior year primarily due to lower attendances partially offset by new product launches.
Other Performance
The decline in Other revenue in fiscal 2015 versus fiscal 2014 was primarily driven by revenue declines in
Asia Pacific. The decrease in Other Service Revenues in fiscal 2015 versus the prior year was primarily driven by
a decline in Other Meeting Paid Weeks, and to a lesser extent by a decline in Other Online Paid Weeks, in Asia
Pacific. The declines in paid weeks in Asia Pacific were driven by the lower Incoming Active Base for each of
the meetings and Online businesses at the beginning of fiscal 2015 versus the beginning of fiscal 2014 and lower
recruitments in fiscal 2015 as compared to fiscal 2014.
The decline in Other product sales and other in fiscal 2015 versus fiscal 2014 was driven in part by a decline
in Asia Pacific in-meeting product sales and licensing revenue and from a decline in revenue from our
franchisees. Revenues from our franchisees totaled $9.9 million in fiscal 2015, a decline of $1.5 million, or 15%,
from the prior year, driven in part by the decline in their meetings business performance, similar to that which we
experienced in North America. In fiscal 2015, in-meeting product sales of $4.4 million decreased by $3.0
million, or 40.1%, or 28.2% on a constant currency basis, versus the prior year driven by volume declines as well
as a decline in product sales per attendee in Asia Pacific of 22.6%, or 7.1% in constant currency.
RESULTS OF OPERATIONS FOR FISCAL 2014 (53 weeks) COMPARED TO FISCAL 2013 (52 weeks)
The Company’s fiscal year ends on the Saturday closest to December 31st and consists of either 52- or
53-week periods. Fiscal 2014 contained 53 weeks, while fiscal 2013 contained 52 weeks. The 2014 53rd week,
which began on December 28, 2014 and ended on January 3, 2015, contributed 1.8 million, or 0.9%, to Total
Paid Weeks for fiscal 2014. It also added 0.2 million, or 0.6%, in additional global attendances to fiscal 2014,
and drove additional revenues of $14.0 million, or 0.9%, to fiscal 2014. Due to the timing of the 53rd week,
additional marketing expense drove a decline in fiscal 2014 operating income. The 53rd week also resulted in an
additional week of interest expense. As a result, in the aggregate the 53rd week had a negative $0.05 per share
impact on fiscal 2014 EPS. The table below sets forth selected financial information for fiscal 2014 from our
53
consolidated statements of net income for fiscal 2014 versus selected financial information for fiscal 2013 from
our consolidated statements of net income for fiscal 2013.
Summary of Selected Financial Data
(In millions, except per share amounts)
Fiscal
2014
Fiscal
2013
Increase/
(Decrease)
%
Change
Revenues, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,479.9 $1,724.1
723.0
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
677.4
$(244.2)
(45.6)
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross Margin % . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general & administrative expenses . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Income Margin % . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on Brazil acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to the noncontrolling interest . . . . . . . . . . . .
Net income attributable to Weight Watchers International,
802.6
54.2%
262.3
241.0
299.3
20.2%
123.0
3.2
(10.5)
—
183.7
65.9
117.7
0.1
1,001.1
(198.5)
58.1%
295.6
247.7
457.8
26.6%
103.1
0.6
—
21.7
332.4
129.6
202.7
—
(33.3)
(6.7)
(158.4)
19.9
2.6
(10.5)
(21.7)
(148.6)
(63.7)
(85.0)
0.1
(14.2%)
(6.3%)
(19.8%)
(11.3%)
(2.7%)
(34.6%)
19.3%
100.0%
—
(100.0%)
(44.7%)
(49.1%)
(41.9%)
—
Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 117.8 $ 202.7
$ (85.0)
(41.9%)
Weighted average diluted shares outstanding . . . . . . . . . . . . . . . . . .
56.7
56.4
0.3
0.6%
Diluted Earnings Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.08 $
3.60
$ (1.52)
(42.2%)
Note: Totals may not sum due to rounding.
Certain results for fiscal 2014 are adjusted to exclude the $11.8 million impact of charges from the
previously disclosed 2014 restructuring plan, $10.5 million related to the gain on the Brazil acquisition and the
$2.4 million net tax benefit related to an intercompany loan write-off in connection with the closure of our China
business partially offset by the recognition of a valuation allowance related to tax benefits for foreign losses that
are not expected to be realized. See “Non-GAAP Financial Measures” above. The table below sets forth a
reconciliation of certain of those components of our selected financial data for the fiscal year ended January 3,
2015 which have been adjusted.
(in millions, except per share amounts)
Fiscal 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to Reported Amounts(1)
2014 Restructuring charges(1)
Gain on Brazil acquisition(1)
Tax benefit, net(1)
. . . . . . . . . . .
. . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Total Adjustments . . . . . . . . . . . . . . . .
Gross
Profit
Gross
Profit
Margin
Operating
Income
Operating
Income
Margin
Net Income
Attributable to
Company
$802.6
54.2% $299.3
20.2%
$117.8
4.6
—
—
4.6
11.8
—
—
11.8
7.2
(6.4)
(2.4)
(1.5)
Diluted
EPS
$ 2.08
0.13
(0.11)
(0.04)
0.03
Fiscal 2014, as adjusted(1) . . . . . . . . . . . . . . . . .
$807.2
54.5% $311.1
21.0%
$116.3
$ 2.05
54
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 2014 to exclude the
impact of the $11.8 million ($7.2 million after tax) of restructuring charges associated with our previously disclosed 2014 restructuring
plan, the impact of the gain of $10.5 million ($6.4 million after tax) recognized in connection with our previously disclosed Brazil
acquisition due to an adjustment to our previously held equity interest to fair value offset by a charge associated with the settlement of
the royalty-free arrangement of the Brazilian partnership and the impact of the $2.4 million net tax benefit associated with an
intercompany loan write-off in connection with the closure of our China business partially offset by the recognition of a valuation
allowance related to tax benefits for foreign losses that are not expected to be realized. See “Non-GAAP Financials Measures” above for
an explanation of our use of non-GAAP financial measures.
Certain results for fiscal 2013 are adjusted to exclude the impact of the $21.7 million early extinguishment
of debt charge. See “Non-GAAP Financial Measures” above. The table below sets forth a reconciliation of those
components of our selected financial data for the fiscal year ended December 28, 2013 which have been adjusted.
(in millions, except per share amounts)
Fiscal 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to Reported Amounts(1)
Early extinguishment of debt(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income
Before
Taxes
Net Income
Attributable
to Company
Diluted
EPS
$332.4
$202.7
$3.60
21.7
21.7
13.3
13.3
0.3
0.3
Fiscal 2013, as adjusted(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$354.0
$216.0
$ 3.9
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 2013 to exclude the
impact of the $21.7 million ($13.3 million after tax) early extinguishment of debt charge associated with our previously reported debt
refinancing. See “Non-GAAP Financials Measures” above for an explanation of our use of non-GAAP financial measures.
Consolidated Results
Revenues
Revenues in fiscal 2014 declined by 14.2% versus fiscal 2013 driven by revenue declines in the meetings
and Online businesses globally, most notably in North America. See “—Segment Results” for additional details
on revenues.
Cost of Revenues and Gross Profit
Total cost of revenues in fiscal 2014 declined $45.6 million, or 6.3%, versus the prior year. Excluding the
impact of the 2014 restructuring charges, total cost of revenues in fiscal 2014 would have declined $50.3 million,
or 7.0%, versus the prior year. Excluding the impact of the 2014 restructuring charges, gross profit for fiscal
2014 would have decreased by $193.9 million, or 19.4%, from fiscal 2013. Excluding the impact of the 2014
restructuring charges, gross margin in fiscal 2014 would have been 54.5%, as compared to gross margin of
58.1% in fiscal 2013. Gross margin compression was driven primarily by the decline in the North America gross
margin, which was partially offset by an increase in gross margin in Continental Europe. The decline in
North America gross margin was driven primarily by fixed cost deleverage and the impact of service provider
compensation changes and training and technology in support of the Personal Coaching offering, 24/7 Expert
Chat and healthcare initiatives.
Marketing
Marketing expenses for fiscal 2014 decreased $33.3 million, or 11.3%, versus fiscal 2013. The decline was
primarily driven by lower TV media and production costs resulting from the integration of TV spots for both our
meetings and Online businesses. The decline was also driven by lower and more efficient digital marketing spend
55
in the United States. This decline was partially offset by the early launch of our winter season brand campaign in
the United States. Marketing expenses as a percentage of revenue were 17.7% in fiscal 2014 as compared to
17.1% in the prior year.
Selling, General and Administrative
Selling, general and administrative expenses for fiscal 2014 decreased $6.8 million, or 2.7%, versus fiscal
2013. Excluding the impact of the 2014 restructuring charges, selling, general and administrative expenses for
fiscal 2014 would have decreased by 5.6% versus fiscal 2013. In fiscal 2014, the Company made concerted
efforts to adopt cost-savings initiatives, including rationalization of its workforce and reduction of its total
payroll and discretionary spend. At the same time, the Company decided to invest in certain healthcare and
technology initiatives, which partially offset the savings. Selling, general and administrative expenses as a
percentage of revenue for fiscal 2014 increased to 16.3% from 14.4% for fiscal 2013. Excluding the impact of the
2014 restructuring charges, selling, general and administrative expenses as a percentage of revenue for fiscal
2014 increased to 15.8% from 14.4% for fiscal 2013.
Operating Income
Operating income for fiscal 2014 decreased $158.4 million, or 34.6%, versus fiscal 2013. This decrease in
operating income was almost exclusively the result of lower operating income from North America in fiscal 2014
as compared to the prior year. Excluding the impact of the 2014 restructuring charges, our operating income
margin in fiscal 2014 would have decreased to 21.0% from 26.5% in fiscal 2013. This decline in operating
income margin was primarily driven by the decline in gross margin, higher selling, general and administrative
and marketing expenses as a percentage of revenues, as compared to the prior year.
Interest Expense
Interest expense in fiscal 2014 increased $19.9 million, or 19.3%, versus fiscal 2013. Interest expense for
fiscal 2014 included a $1.6 million write-off of deferred financing fees associated with the reduction of the
amount of our Revolving Facility (defined hereafter). The increase in interest expense was primarily driven by
the difference in the notional amount of our interest rate swaps in effect during fiscal 2014 versus the prior year,
the 25 basis point increase related to the issuance of revised corporate ratings by S&P and Moody’s on
February 21, 2014 and higher interest rates on our debt as a result of the April 2, 2013 debt refinancing. See
“—Liquidity and Capital Resources—Long-Term Debt” for additional details regarding our Revolving Facility
and interest rates on our debt. Our average debt outstanding decreased by $24.4 million to $2,372.9 million in
fiscal 2014 from $2,397.3 million in fiscal 2013, however, the effective interest rate on our debt, excluding the
impact of our interest rate swaps, increased by 0.37% to 3.86% in fiscal 2014 from 3.49% in fiscal
2013. Including the impact of our interest rate swaps, our effective interest rate increased to 4.67% in fiscal 2014
from 3.92% in fiscal 2013. For additional details on our interest rate swap see “—“Item 7A. Quantitative and
Qualitative Disclosures about Market Risk” in Part III of this Annual Report on Form 10-K.
Gain on Brazil Acquisition
In March 2014, we acquired an additional 45% equity interest in our Brazilian partnership thereby
increasing our equity interest to 80%. As a result of this transaction, we adjusted our previously held equity
interest to fair value and recorded a charge associated with the settlement of the royalty-free arrangement of our
Brazilian partnership. The net effect of these items resulted in us recognizing a pre-tax gain of $10.5 million in
fiscal 2014.
56
Other Expense, Net
Other expense, net, which consists of the impact of foreign currency on intercompany transactions, increased by
$2.6 million in fiscal 2014 versus the prior year.
Tax
Our effective tax rate was 35.9% for fiscal 2014 as compared to 39.0% for fiscal 2013. The decrease was due
mainly to the net tax benefit associated with the closure of our China business that was recorded in fiscal 2014 and a
shift in the mix of our domestic and foreign earnings which resulted in lower state income taxes. These were offset by
the recognition of a valuation allowance that was recorded in fiscal 2014 related to tax benefits previously recorded for
foreign losses that are not expected to be realized.
Net Income Attributable to the Company and Earnings Per Share
Net income attributable to the Company in fiscal 2014 declined 41.9% versus fiscal 2013. Excluding the impact of
the 2014 restructuring charges, the gain on the Brazil acquisition, the net tax benefit offset by the recognition of a
valuation allowance, and the early extinguishment of debt charge, net income attributable to the Company in fiscal
2014 would have declined 46.2% versus the adjusted prior year. This decline in net income attributable to the
Company was primarily driven by the decrease in operating income in fiscal 2014 versus the prior year.
EPS in fiscal 2014 decreased to $2.08 versus fiscal 2013. Excluding the impact of the 2014 restructuring charges,
the gain on the Brazil acquisition, the net tax benefit offset by the recognition of a valuation allowance and the early
extinguishment of debt charge, EPS would have been $2.05 in fiscal 2014 as compared to $3.86 in the prior year.
Segment Results
Metrics and Business Trends
The following tables set forth key metrics by reportable segment for fiscal 2014 and the percentage change in
those metrics versus the prior year:
(in millions unless otherwise stated)
GAAP
Product
Sales &
Other
Service
Revenues
Fiscal 2014
Constant Currency
Total
Revenues
Service
Revenues
Product
Sales &
Other
Total
Revenues
Total
Paid
Weeks
Incoming
Active
Base
EOP
Active
Base
(in thousands)
North America . . . . . . . . . . . . . . . . . . $ 794.4 $153.3 $ 947.7 $ 799.6 $153.8 $ 953.4 117.1 2,066.1 1,617.8
277.8
UK . . . . . . . . . . . . . . . . . . . . . . . . . . . .
551.9
CE . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62.1
. . . . . . . . . . . . . . . . . . . . . . . .
Other(1)
297.4
528.4
71.1
148.3
298.1
79.9
108.6
230.9
48.0
102.7
230.5
50.6
156.8
298.9
76.5
48.2
68.0
28.4
45.6
67.6
29.4
20.2
35.6
4.9
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . $1,181.9 $298.0 $1,479.9 $1,183.4 $296.2 $1,479.6 177.8 2,962.9 2,509.5
North America . . . . . . . . . . . . . . . . . . .
UK . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CE . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1) . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
-18.0% -21.9% -18.6% -17.4% -21.6% -18.1% -16.8% -12.3% -21.7%
-5.5% -16.6% -9.2% -10.6% -21.2% -14.1% -9.2% -14.3% -6.6%
1.2% -4.6% -0.2% 1.0% -5.2% -0.4% 3.1% 14.6% 4.4%
-2.8% -25.1% -12.5% 2.4% -22.8% -8.5% -2.2% -7.1% -12.6%
-13.1% -18.0% -14.2% -13.0% -18.5% -14.2% -12.2% -8.6% -15.3%
% Change Fiscal 2014 vs. Fiscal 2013
Note: Totals may not sum due to rounding
(1) Represents Asia Pacific and emerging markets operations and franchise revenues.
57
(in millions unless otherwise stated) GAAP
Constant
Currency
Meeting Fees
Fiscal 2014
Meeting
Paid
Weeks
Incoming
Active
Meeting
Subscribers
EOP Active
Meeting
Subscribers
Online
Subscription
Revenues
GAAP
Constant
Currency
Online
Paid
Weeks
Incoming
Active
Online
Subscribers
EOP
Active
Online
Subscribers
(in thousands)
North America . . . . . . . . . . . . . $496.2 $499.3 50.3
UK . . . . . . . . . . . . . . . . . . . . . .
76.4 12.4
CE . . . . . . . . . . . . . . . . . . . . . . 133.4 133.0 12.8
2.7
Other(1) . . . . . . . . . . . . . . . . . . .
35.6
80.8
34.1
(in thousands)
833.2
166.0
183.6
33.9
692.6 $298.2 $300.3 66.8 1,232.9
131.4
26.4
158.1
7.9
344.8
97.5 22.8
178.2
37.1
2.1
15.0
26.4
27.9
97.4
13.9
925.2
119.7
373.6
35.6
Total . . . . . . . . . . . . . . . . . . . . . $744.6 $744.3 78.2
1,216.7
1,055.4 $437.4 $439.1 99.6 1,746.2
1,454.1
North America . . . . . . . . . . . .
UK . . . . . . . . . . . . . . . . . . . . .
CE . . . . . . . . . . . . . . . . . . . . .
Other(1) . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . .
-16.6% -16.1% -15.8% -11.7% -16.9% -20.1% -19.6% -17.5% -12.6% -25.0%
-5.2% -10.4% -9.6% -18.7% -4.7% -6.2% -11.3% -8.6% -8.0% -8.9%
-2.8% -3.1% -2.5% -0.9% -2.9% 7.3% 7.4% 6.5% 25.0% 8.4%
0.3% 4.8% 6.2% -3.4% -22.0% -9.6% -2.9% -11.0% -10.2% -4.1%
-12.6% -12.6% -12.3% -11.1% -13.3% -14.1% -13.8% -12.2% -6.7% -16.7%
% Change Fiscal 2014 vs. Fiscal 2013
Note: Totals may not sum due to rounding
(1) Represents Asia Pacific and emerging markets operations and franchise revenues.
North America Performance
North America continued to face strong competition for consumer trial from an evolving competitor set, including
mobile apps and activity monitors, during fiscal 2014. The Company believes this competition drove declines in all
revenue categories in North America in fiscal 2014 versus the prior year. The decline in North America Total Paid
Weeks primarily resulted from the lower Incoming Active Base at the beginning of fiscal 2014 versus the beginning of
fiscal 2013 as well as from lower recruitments in fiscal 2014 versus the prior year. In response to weakening
recruitment trends in early fiscal 2014, North America introduced new advertising and implemented new promotional
tactics. In addition, the United States launched its 2014 winter season brand campaign one month early.
The decline in North America product sales and other was driven primarily by a decline in in-meeting product
sales and to a lesser extent a decline in licensing revenue. In fiscal 2014, in-meeting product sales of $85.2 million
decreased by $33.9 million, or 28.5%, versus the prior year. This decrease resulted primarily from a 15.3% attendance
decline in fiscal 2014 as compared to the prior year. In-meeting product sales per attendee decreased by 15.5% in fiscal
2014 versus the prior year, driven primarily by a decline in sales of enrollment products. Licensing revenue of $37.2
million declined $1.4 million, or 3.7%, from $38.6 million in the prior year.
United Kingdom Performance
The decline in UK revenues in fiscal 2014 versus the prior year was driven primarily by the decline in product
sales and to a lesser extent a decline in Service Revenues. The decline in UK Total Paid Weeks was driven by the
lower Incoming Active Base at the beginning of fiscal 2014 versus the beginning of fiscal 2013 coupled with lower
recruitments in fiscal 2014 as compared to the prior year. In response to weakening recruitment trends, primarily in the
meetings business, early in fiscal 2014, the United Kingdom introduced new advertising, implemented new
promotional tactics and invested in a local marketing campaign to combat a strong local competitor. As a result of
these initiatives, although still negative in fiscal 2014, the United Kingdom experienced an improvement in its
recruitment trend in the second half of fiscal 2014 as compared to the prior year period.
The decline in UK product sales and other in fiscal 2014 versus the prior year was driven primarily by a decline in
in-meeting product sales and to a lesser extent a decline in licensing revenue. In fiscal 2014, in-meeting product sales
58
of $30.2 million decreased by $5.7 million, or 15.9%, versus the prior year. This decrease resulted primarily from
an 11.4% attendance decline in fiscal 2014 as compared to the prior year. In-meeting product sales per attendee
also declined by 5.0%, or 10.3% on a constant currency basis, in fiscal 2014 versus the prior year driven by the
impact of the Simple Start program on product sales. The decline in licensing revenue was driven by timing
associated with brand marketing.
Continental Europe Performance
The decline in Continental Europe revenues in fiscal 2014 versus the prior year was driven primarily by the
decline in product sales and other partially offset by an increase in Service Revenues. The increase in Continental
Europe Service Revenues on a constant currency basis in fiscal 2014 versus fiscal 2013 was primarily the result
of an increase in Online Subscription Revenues versus the prior year. This increase in Online Subscription
Revenues was driven by the higher number of Incoming Active Online Subscribers at the start of fiscal 2014
versus the start of fiscal 2013 which drove higher Online Paid Weeks in the year as compared to the prior year.
This increase in Online Subscription Revenues more than offset a lower number of Incoming Active Meeting
Subscribers and recruitment softness in the meetings business, particularly in Germany, in fiscal 2014.
The decline in Continental Europe product sales and other in fiscal 2014 versus the prior year was driven
primarily by both a decline in in-meeting product sales and a decline in licensing revenue. In fiscal 2014, in-
meeting product sales of $46.3 million decreased by $1.7 million, or 3.6% (4.4% on a constant currency basis),
versus the prior year. This decrease resulted primarily from a 5.2% attendance decline in fiscal 2014 as compared
to the prior year. In fiscal 2014, licensing revenue of $10.1 million declined $2.0 million, or 16.2% (16.3% on a
constant currency basis), from $12.1 million in the prior year driven by the timing associated with brand
marketing.
Other Performance
The decline in Other revenue in fiscal 2014 versus the prior year was driven by revenue declines in Asia
Pacific and with our franchisees, partially offset by the beneficial impact of the consolidation of the Brazil
operations. The increase in Other Service Revenues in fiscal 2014 versus the prior year was driven by a 6.2%
increase in Other Meeting Paid Weeks. The decline in fiscal 2014 Other Total Paid Weeks versus the prior year
was driven by the lower Incoming Active Base at the beginning of fiscal 2014 versus the beginning of fiscal 2013
and higher recruitments as compared to the prior year.
The decline in Other product sales and other in fiscal 2014 versus the prior year was driven primarily by a
decline in revenue from our franchisees and to a lesser extent our licensees. Revenues from our franchisees
totaled $11.4 million in fiscal 2014, a decline of $4.6 million, or 28.8%, from the prior year, driven in part by the
decline in their meetings business performance, similar to that which we experienced in North America, and in
the number of franchises resulting from our recent franchise acquisitions. In fiscal 2014, licensing revenue
declined in part due to the timing of brand revenue from our licensing partners. In fiscal 2014, in-meeting
product sales of $7.4 million decreased by $1.6 million, or 17.5% (14.5% on a constant currency basis), versus
the prior year driven by volume declines in Asia Pacific partially offset by the impact of the Brazil acquisition.
Liquidity and Capital Resources
Cash flows provided by operating activities have historically supplied, and are expected to continue to
supply, us with our primary source of liquidity. We use these cash flows, supplemented with long-term debt and
short-term borrowings, to fund our operations and global initiatives, pay down debt and opportunistically engage
in selective acquisitions. See “—Transformation Plan” for a discussion of our strategic initiatives. On
October 30, 2013, we announced that we suspended our quarterly cash dividend, as described below (see
“—Dividends”). We believe that cash generated by our revenue forecast for fiscal 2016 of approximately $1.2
billion, our continued cost focus, the launch of our 2016 winter season program innovation, and our cash on hand
59
of $241.5 million at the end of fiscal 2015 will provide us with sufficient liquidity to meet our obligations for the
next twelve months, including our April 2016 debt maturity obligation of $144.3 million. Our cash on hand of
$241.5 million at the end of fiscal 2015 includes the $43.2 million cash payment we received on October 19,
2015 in connection with the Winfrey Transaction and the $48.0 million of proceeds from our revolver borrowing
under the Revolving Facility. The revolver borrowing is classified as a short-term liability in consideration of the
fact that the terms of the Revolving Facility require an assessment as to whether there have been any material
adverse changes with respect to the Company in connection with our monthly interest elections. Although the
revolver borrowing is classified as a short-term liability, absent any change in fact and circumstance, we have the
ability to extend and not repay the Revolving Facility until its due date of April 2, 2018.
Balance Sheet Working Capital
The following table sets forth certain relevant measures of our balance sheet working capital at:
January 2,
2016
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 359.0
503.1
Working capital deficit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . .
(144.2)
241.5
213.3
Working capital deficit, excluding change in cash and cash
January 3,
2015
(in millions)
$ 425.7
431.7
(6.0)
301.2
80.7
Increase/
(Decrease)
$ (66.7)
71.4
(138.1)
(59.7)
132.6
equivalents and current portion of long-term debt . . . . . . . . . .
$(172.4)
$(226.5)
$ 54.1
We generally operate with negative working capital that is driven in part by our commitment and
subscription plans which are our primary payment method. These plans require members and subscribers to pay
us for meetings and Online subscription products, respectively, as applicable, before we pay for our obligations
in the normal course of business. These prepayments are recorded as a current liability on our balance sheet
which has resulted in, and in certain circumstances has helped drive, negative working capital. This core
characteristic of our business model is expected to continue. However, during a period in which revenue is
declining, we get less working capital benefit from this deferred revenue.
Including changes in cash and cash equivalents and the current portion of long-term debt, our working
capital deficit increased by $138.1 million to $144.2 million at January 2, 2016 from $6.0 million at January 3,
2015. This increase in our working capital deficit was driven in large part by the principal debt maturity payment
of $144.3 million due on April 2, 2016, reflected in current portion of long-term debt as of January 2, 2016
(included in long-term as of January 3, 2015), and to a lesser extent the decline in year-end cash in fiscal 2015
from fiscal 2014 of $59.7 million. Prepayments of debt during fiscal 2015 as detailed in the following paragraph
totaled $150.5 million, which more than offset cash provided by operating activities, the $43.2 million cash
payment we received in connection with the Winfrey Transaction and the $48.0 million of proceeds from our
revolver borrowing under our Revolving Facility.
On March 25, 2015, we paid an aggregate amount of cash proceeds totaling $57.4 million plus an amount
sufficient to pay accrued and unpaid interest on the amount prepaid to prepay $63.1 million in aggregate
principal amount of term loans under the Tranche B-1 Term Facility. In addition, we made a voluntary
prepayment at par of $2.5 million in respect of such term loans under the Tranche B-1 Term Facility to reduce
our then remaining excess cash flow prepayment obligation. For a discussion of this obligation, see “—Long-
Term Debt”. On June 26, 2015, we paid an aggregate amount of cash proceeds totaling $77.2 million plus an
amount sufficient to pay accrued and unpaid interest on the amount prepaid to prepay $84.9 million in aggregate
principal amount of term loans under the Tranche B-1 Term Facility. After making these prepayments and
scheduled debt repayments of $21.0 million in fiscal 2015, the current portion of our long-term debt increased to
$213.3 million versus the end of fiscal 2014.
60
Excluding the changes in cash and cash equivalents and current portion of long-term debt at both dates, the
working capital deficit at January 2, 2016 decreased by $54.2 million to $172.3 million from $226.5 million at
January 3, 2015. The factors contributing to this decrease in our working capital deficit were: (i) a $31.6 million
decrease in other operational liabilities arising from lower accrued liabilities and accounts payable balances
versus year-end fiscal 2014 primarily driven by reduced marketing spend and a decline in technology
transformation spend, (ii) a $17.7 million decrease in accrued salaries and wages driven by lower headcount and
a lower bonus payment, (iii) a $7.7 million increase in prepaid income taxes, (iv) a $8.7 million increase in other
current assets driven by a tax withholding receivable in Germany, (v) a $4.6 million decrease in deferred revenue
driven by a decline in business performance and (vi) a $2.2 million decline in accrued interest. These factors
were partially offset by: (i) a $4.5 million decrease in inventory, (ii) a $1.7 million increase in the derivative
payable, (iii) a $2.7 million decrease in receivable and (iv) a $9.4 million decrease in income taxes in fiscal 2015.
Cash Flows
The following table sets forth a summary of the Company’s cash flows for the fiscal years ended:
January 2,
2016
Net cash provided by operating activities . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . .
$ 54.8
$(40.3)
$(68.6)
January 3,
2015
(in millions)
$231.6
$ (69.0)
$ (29.4)
December 28,
2013
$ 323.5
$(145.3)
$ (74.4)
Operating Activities
Fiscal 2015
Cash flows provided by operating activities of $54.8 million for fiscal 2015 reflected a decrease of
$176.8 million from $231.6 million of cash flows provided by operating activities for fiscal 2014. The decrease
in cash provided by operating activities was primarily the result of $84.9 million of lower net income attributable
to the Company in fiscal 2015 as compared to the prior year and the year-over-year working capital deficit
decrease of $84.1 million.
Fiscal 2014
Cash flows provided by operating activities of $231.6 million for fiscal 2014 decreased by $91.9 million
from $323.5 million of cash flows provided by operating activities for fiscal 2013. The decrease in cash provided
by operating activities was primarily the result of $85.0 million of lower net income attributable to the Company
in fiscal 2014 as compared to the prior year.
Fiscal 2013
Cash flows provided by operating activities of $323.5 million for fiscal 2013 decreased by $13.2 million
from $336.7 million in fiscal 2012. The decrease in cash provided by operating activities was primarily the result
of lower net income in fiscal 2013 as compared to the prior year offset by the add back of the non-cash early
extinguishment of debt charge and the intangible and long-lived asset impairment charges in fiscal 2013 as well
as a payment to HMRC in fiscal 2012 in connection with the previously reported UK self-employment liability.
61
Investing Activities
Fiscal 2015
Net cash used in investing activities totaled $40.3 million in fiscal 2015, a decrease of $28.7 million as
compared to fiscal 2014. This decrease was primarily attributable to the lower investment in acquisitions in fiscal
2015 versus the prior year. For additional information on our acquisitions, see “Item 6. Selected Financial Data”.
In addition, we invested $15.4 million less in our technology and operating infrastructure in the fiscal 2015 as
compared to fiscal 2014. See “—Transformation Plan” for a discussion of our strategic initiatives driving our
investing activities.
Fiscal 2014
Net cash used for investing activities totaled $69.0 million in fiscal 2014, a decrease of $76.4 million as
compared to fiscal 2013. This decrease was primarily attributable to the lower aggregate investment in
acquisitions in fiscal 2014 versus the prior year. For additional information on our acquisitions, see “Item 6.
Selected Financial Data”. In addition, in fiscal 2014, although we invested in technology and operating
infrastructure, as well as healthcare initiatives, we incurred lower capital expenditures as compared to fiscal 2013
which had expenditures in connection with the move of our headquarters and our previously disclosed retail
initiative to upgrade our meetings centers.
Fiscal 2013
Net cash used for investing activities totaled $145.3 million in fiscal 2013, an increase of $35.9 million as
compared to fiscal 2012. This increase was primarily attributable to the $83.8 million aggregate purchase price
paid for franchise acquisitions completed in fiscal 2013. In fiscal 2013, we acquired substantially all of the assets
of the following franchisees: Weight Watchers of Alberta Ltd. and Weight Watchers of Saskatchewan Ltd. for an
aggregate purchase price of $35.0 million, Weight Watchers of West Virginia, Inc. for a net purchase price of
$16.0 million, Weight Watchers of Columbus, Inc. for a net purchase price of $23.3 million, Weight Watchers of
Northern Nevada, Inc. for a net purchase price of $4.0 million, Weight Watchers of Manitoba Ltd. for a net
purchase price of $5.2 million, and Weight Watchers of Franklin and St. Lawrence Counties Inc. for a net
purchase price of $0.3 million. In addition, we incurred capital expenditures in connection with the move of our
headquarters, our retail initiative and capitalized software expenditures to support our customer relationship
management platform and other global systems initiatives.
Financing Activities
Fiscal 2015
Net cash used in financing activities totaled $68.6 million in fiscal 2015, primarily due to $137.1 million of
debt prepayments in connection with the debt tender offers discussed below and scheduled debt repayments of
$21.0 million offset by the proceeds of our revolver borrowing of $48.0 million under the Revolving Facility as
well as the $43.2 million cash payment we received, offset by $1.7 million of related legal fees, from the sale of
our common stock to Ms. Winfrey in fiscal 2015. For a discussion of the debt tender offers, see “—Long-Term
Debt”.
Fiscal 2014
Net cash used in financing activities totaled $29.4 million in fiscal 2014, primarily due to term loan
payments under the WWI Credit Facility of $30.0 million.
62
Fiscal 2013
Net cash used for financing activities totaled $74.4 million in fiscal 2013 and included $44.8 million of
deferred financing fees in connection with our April 2013 debt refinancing. Additionally, term loan payments
under our then-existing credit facility of $2.41 billion were offset by new borrowings of $2.40 billion in
connection with our April 2013 debt refinancing. In addition, we paid $29.6 million of dividends to our
shareholders which offset $18.3 million in proceeds from stock options exercised and the tax benefit thereon in
fiscal 2013.
Long-Term Debt
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 as we determine
appropriate.
The following schedule sets forth our long-term debt obligations at January 2, 2016:
Long-Term Debt
At January 2, 2016
(Balances in millions)
Revolving Facility due April 2, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tranche B-1 Term Facility due April 2, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tranche B-2 Term Facility due April 2, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less Current Portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance
$
48.0
144.3
2,042.3
2,234.6
213.3
Total Long-Term Debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,021.3
Our credit facilities at the end of the first quarter of fiscal 2013 consisted of the following term loan
facilities and revolving credit facilities: a tranche B loan, or Term B Loan, a tranche C loan, or Term C Loan, a
tranche D loan, or Term D Loan, a tranche E loan, or Term E Loan, a tranche F loan, or Term F Loan, revolving
credit facility A-1, or Revolver A-1, and revolving credit facility A-2, or Revolver A-2.
On April 2, 2013, we refinanced our credit facilities pursuant to a new Credit Agreement, or as amended,
supplemented or otherwise modified, the Credit Agreement, among the Company, the lenders party thereto,
JPMorgan Chase Bank, N.A., as administrative agent and an issuing bank, The Bank of Nova Scotia, as
revolving agent, swingline lender and an issuing bank, and the other parties thereto. The Credit Agreement
provides for (a) a revolving credit facility (including swing line loans and letters of credit) in an initial aggregate
principal amount of $250.0 million that will mature on April 2, 2018, or the Revolving Facility, (b) an initial
term B-1 loan credit facility in an aggregate principal amount of $300.0 million that will mature on April 2, 2016,
or Tranche B-1 Term Facility, and (c) an initial term B-2 loan credit facility in an aggregate principal amount of
$2,100.0 million that will mature on April 2, 2020, or Tranche B-2 Term Facility. We refer herein to the Tranche
B-1 Term Facility together with the Tranche B-2 Term Facility as the Term Facilities, and the Term Facilities
and Revolving Facility collectively as the WWI Credit Facility. In connection with this refinancing, we used the
proceeds from borrowings under the Term Facilities to pay off a total of $2,399.9 million of outstanding loans,
consisting of $128.8 million of Term B Loans, $110.6 million of Term C Loans, $117.6 million of Term D
Loans, $1,125.0 million of Term E Loans, $817.9 million of Term F Loans, $21.2 million of loans under the
Revolver A-1 and $78.8 million of loans under the Revolver A-2. Following the refinancing of a total of
$2,399.9 million of loans, at April 2, 2013, we had $2,400.0 million debt outstanding under the Term Facilities
and $248.8 million of availability under the Revolving Facility. We incurred fees of $44.8 million during the
63
second quarter of fiscal 2013 in connection with this refinancing. In the second quarter of fiscal 2013, we wrote-
off fees associated with this refinancing which resulted in our recording a charge of $21.7 million in early
extinguishment of debt.
On September 26, 2014, we entered into an agreement with certain lenders amending the Credit Agreement
that, among other things, eliminated the Financial Covenant (as defined in the Credit Agreement) with respect to
the Revolving Facility. In connection with this amendment, we wrote-off deferred financing fees of
approximately $1.6 million in the third quarter of fiscal 2014. Concurrently with and in order to effect this
amendment, we reduced the amount of the Revolving Facility from $250.0 million to $50.0 million.
Under the terms of the Credit Agreement, depending on our Consolidated Leverage Ratio (as defined in the
Credit Agreement), we are obligated to offer to prepay the Term Facilities in an aggregate amount determined by
our excess cash flow (as defined in the Credit Agreement). On March 13, 2015, we commenced an offer to
prepay at a discount to par up to $75.0 million in aggregate principal amount of term loans outstanding under the
Tranche B-1 Term Facility. On March 20, 2015, we accepted offers with a discount equal to or greater than
9.00% in respect of such term loans. On March 25, 2015, we paid an aggregate amount of cash proceeds totaling
$57.4 million plus an amount sufficient to pay accrued and unpaid interest on the amount prepaid to prepay $63.1
million in aggregate principal amount of such term loans under the Tranche B-1 Term Facility. This expenditure
reduced, on a dollar for dollar basis, our $59.7 million obligation to make a mandatory excess cash flow
prepayment offer to the term loan lenders under the terms of the Credit Agreement. In addition, we made a
voluntary prepayment at par on March 25, 2015 of $2.5 million in respect of such term loans under the Tranche
B-1 Term Facility to reduce the remaining excess cash flow prepayment obligation for fiscal 2015. As a result of
this prepayment, we wrote-off fees of $0.3 million, incurred fees of $0.6 million and recorded a gain on early
extinguishment of debt of $4.7 million, inclusive of these fees, in the first quarter of fiscal 2015.
On June 17, 2015, we commenced another offer to prepay at a discount to par up to $229.0 million in
aggregate principal amount of term loans outstanding under the Tranche B-1 Term Facility. On June 22, 2015,
we accepted offers with a discount equal to or greater than 9.00% in respect of such term loans. On June 26,
2015, we paid an aggregate amount of cash proceeds totaling $77.2 million plus an amount sufficient to pay
accrued and unpaid interest on the amount prepaid to prepay $84.9 million in aggregate principal amount of such
term loans under the Tranche B-1 Term Facility. As a result of this prepayment, we wrote-off fees of $0.3
million, incurred fees of $0.6 million and recorded a gain on early extinguishment of debt of $6.7 million,
inclusive of these fees, in the second quarter of fiscal 2015.
On July 14, 2015, we drew down the $48.0 million available on our Revolving Facility in order to enhance
our cash position and to provide additional financial flexibility. The revolver borrowing has been classified as a
short-term liability in consideration of the fact that the terms of the Revolving Facility require an assessment as
to whether there have been any material adverse changes with respect to the Company in connection with our
monthly interest elections. Although the revolver borrowing has been classified as a short-term liability, absent
any change in fact and circumstance, we have the ability to extend and not repay the Revolving Facility until its
due date of April 2, 2018.
At January 2, 2016, under the WWI Credit Facility, we had $2,186.6 million outstanding consisting entirely
of term loans, and borrowings of $48.0 million outstanding under the Revolving Facility. In addition, at
January 2, 2016, the Revolving Facility had $1.8 million in issued but undrawn letters of credit outstanding
thereunder and $0.2 million in available unused commitments thereunder. The proceeds from borrowings under
the Revolving Facility (including swing line loans and letters of credit) are available to be used for working
capital and general corporate purposes.
At the end of fiscal 2015, fiscal 2014 and fiscal 2013, our debt consisted entirely of variable-rate
instruments. Interest rate swaps were entered into to hedge a portion of the cash flow exposure associated with
our variable-rate borrowings. The weighted average interest rate on our debt, exclusive of the impact of swaps,
64
was approximately 3.93%, 3.90%, and 3.65% per annum at the end of fiscal 2015, fiscal 2014 and fiscal 2013,
respectively. The weighted average interest rate on our debt, including the impact of swaps, was approximately
5.03%, 4.93%, and 4.08% per annum at the end of fiscal 2015, fiscal 2014 and fiscal 2013, respectively.
Borrowings under the Credit Agreement bear interest at a rate equal to, at our option, LIBOR plus an
applicable margin or a base rate plus an applicable margin. LIBOR under the Tranche B-2 Term Facility is
subject to a minimum interest rate of 0.75% and the base rate under the Tranche B-2 Term Facility is subject to a
minimum interest rate of 1.75%. Under the terms of the Credit Agreement, in the event we receive a corporate
rating of BB- (or lower) from S&P and a corporate rating of Ba3 (or lower) from Moody’s, the applicable margin
relating to both of the Term Facilities would increase by 25 basis points. On February 21, 2014, both S&P and
Moody’s issued revised corporate ratings of the Company of B+ and B1, respectively. As a result, effective
February 21, 2014, the applicable margin on borrowings under the Tranche B-1 Term Facility went from 2.75%
to 3.00% and on borrowings under the Tranche B-2 Term Facility went from 3.00% to 3.25%. The applicable
margin relating to the Revolving Facility will fluctuate depending upon our Consolidated Leverage Ratio. At
January 2, 2016, borrowings under the Tranche B-1 Term Facility bore interest at LIBOR plus an applicable
margin of 3.00% and borrowings under the Tranche B-2 Term Facility bore interest at LIBOR plus an applicable
margin of 3.25%. Based on our Consolidated Leverage Ratio as of January 2, 2016, borrowings under the
Revolving Facility bore interest at LIBOR plus an applicable margin of 2.50%. On a quarterly basis, we will pay
a commitment fee to the lenders under the Revolving Facility in respect of unutilized commitments thereunder,
which commitment fee will fluctuate, but in no event exceed 0.50% per annum, depending upon our
Consolidated Leverage Ratio. At our Consolidated Leverage Ratio of 7.52:1.00 as of January 2, 2016, the
commitment fee was 0.50% per annum. We also will pay customary letter of credit fees and fronting fees under
the Revolving Facility.
The Credit Agreement contains 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 and enter into consolidations, mergers and transfers of all or
substantially all of our assets. The WWI Credit Facility does not require us to meet any financial maintenance
covenants and is guaranteed by certain of our existing and future subsidiaries. Substantially all of our assets
secure the WWI Credit Facility.
Dividends
On October 30, 2013, we announced that we suspended our quarterly cash dividend. We currently intend to
use the annual cash savings to preserve financial flexibility while funding our strategic growth initiatives and
building cash for future debt repayments. Any future determination to declare and pay dividends will be made at
the discretion of our Board of Directors, after taking into account our financial results, capital requirements and
other factors it may deem relevant. The WWI Credit Facility also contains restrictions on our ability to pay
dividends on our common stock.
The WWI Credit Facility provides that we are permitted to pay dividends and extraordinary dividends, as
well as repurchase shares of our common stock, so long as we are not in default under the WWI Credit Facility
agreement. However, payment of extraordinary dividends and stock repurchases shall not exceed $100.0 million
in the aggregate in any fiscal year if the Consolidated Leverage Ratio is greater than 3.25:1. As of January 2,
2016, our Consolidated Leverage Ratio was greater than 3.25:1 and we expect that it will remain above 3.25:1 for
the foreseeable future.
Contractual Obligations
We are obligated under non-cancelable agreements primarily for office and rent facilities operating leases.
Consolidated rent expense charged to operations under all our leases for fiscal 2015 was approximately
$42.1 million.
65
The following table summarizes our future contractual obligations as of the end of fiscal 2015:
Total
Less than
1 Year
Payment Due by Period
1-3 Years
3-5 Years
(in millions)
More than
5 Years
Long-Term Debt(1)
Principal(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases and non-cancelable agreements . . . . . . .
Other long-term obligations(3) . . . . . . . . . . . . . . . . . . . . . . .
$2,234.5
349.1
219.5
10.6
$213.3
84.9
46.1
0.7
$ 42.0
163.8
50.8
1.0
$1,979.2
100.4
27.2
0.1
$ —
—
95.4
8.8
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,813.7
$345.0
$257.6
$2,106.9
$104.2
(1) Due to the fact that all of our debt is variable rate based, we have assumed for purposes of this table that the interest rate on all of our
debt as of the end of fiscal 2015 remains constant for all periods presented. The above does not include the impact of our interest rate
swap which has a fair value of $44.2 million, or the $17.7 million of interest expense which is expected to be reclassified from
accumulated other comprehensive loss into earnings in fiscal 2016.
(2) The Revolving Facility principal amount of $48.0 million is classified as current and included in the “less than 1 year” caption. As we
have the option to extend and not repay until 2018, interest amounts are included in the respective periods in the table above.
(3) “Other long-term obligations” primarily consist of deferred rent costs. The provision for income tax contingencies included in other long-
term liabilities on the consolidated balance sheet is not included in the 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 as we determine
appropriate. We believe that cash flows from operating activities, together with cash on hand, will provide
sufficient liquidity for the next 12 months to fund currently anticipated capital expenditure and working capital
requirements, as well as debt service requirements.
Franchise Acquisitions
Although we did not acquire any franchises in fiscal 2015 and 2014, in fiscal 2013, we made the following
franchise acquisitions:
In March 2013, we acquired substantially all of the assets of our Alberta and Saskatchewan, Canada
franchisees, Weight Watchers of Alberta Ltd. and Weight Watchers of Saskatchewan Ltd., for an aggregate
purchase price of $35.0 million.
In July 2013, we acquired substantially all of the assets of our West Virginia franchisee, Weight Watchers
of West Virginia, Inc., for a net purchase price of $16.0 million, our Columbus, Ohio franchisee, Weight
Watchers of Columbus, Inc., for a net purchase price of $23.3 million and our Reno, Nevada franchisee, Weight
Watchers of Northern Nevada, Inc., for a net purchase price of $4.0 million.
In October 2013, we acquired substantially all of the assets of our Manitoba, Canada franchisee, Weight
Watchers of Manitoba Ltd., for a net purchase price of $5.2 million and our Franklin and St. Lawrence Counties,
New York franchisee, Weight Watchers of Franklin and St. Lawrence Counties Inc., for a net purchase price of
$0.3 million.
Acquisition of Additional Equity Interest in Brazil
Prior to March 12, 2014, we had owned 35% of VPM, a Brazilian limited liability partnership. On
March 12, 2014, we acquired an additional 45% equity interest in VPM for a net purchase price of $14.2 million.
66
Acquisition of Wello
On April 16, 2014, we acquired Knowplicity, Inc., d/b/a Wello, an online fitness and personal training
company, for a net purchase price of $9.0 million. Payment was in the form of common stock issued of
$4.2 million and cash of $4.8 million.
Acquisition of Weilos
On March 11, 2015, we acquired Weilos, a California-based startup with an online social platform that
provides a mobile health and weight loss community, for a purchase price of $6.7 million. Payment was in the
form of common stock issued of $2.8 million, restricted stock issued of $0.1 million and cash of $2.8 million
plus cash in reserves of $1.0 million.
Winfrey Transaction
On October 19, 2015, we issued and sold to Ms. Winfrey an aggregate of 6.4 million shares of our common
stock for an aggregate cash purchase price of $43.2 million. For additional details on the Winfrey Transaction,
see “Item 1. Business—History—Winfrey Transaction” in Part I of this Annual Report on Form 10-K.
Factors Affecting Future Liquidity
Any future acquisitions, joint ventures or other similar transactions could require additional capital and we
cannot be certain that any additional capital will be available on acceptable terms or at all. Our ability to fund our
capital expenditure requirements, interest, principal and dividend payment obligations and working capital
requirements depends on our future operations, performance and cash flow. These are subject to prevailing
economic conditions and to financial, business and other factors, some of which are beyond our control.
Off-Balance Sheet Transactions
As part of our ongoing business, we do not participate in transactions that generate relationships with
unconsolidated entities or financial partnerships established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes, such as entities often referred to as structured
finance or special purpose entities.
Related Parties
For a discussion of related party transactions affecting us, see “Item 12. Certain Relationships and Related
Transactions, and Director Independence” in Part III of this Annual Report on Form 10-K.
Seasonality
Our business is seasonal due to the importance of the winter season to our overall recruitment environment.
Our advertising schedule generally supports the three key recruitment-generating seasons of the year: winter,
spring and fall, with winter having the highest concentration of advertising spending.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks relating to interest rate changes and foreign currency fluctuations. All of our
market risk sensitive instruments were entered into for purposes other than trading. The Company’s exposure to
market risk as of the end of fiscal 2015 is described below.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates to interest expense of variable rate debt, in
particular changes in LIBOR or the base rates which are used to determine the applicable interest rates for
67
borrowings under the WWI Credit Facility. As of the end of fiscal 2015, borrowings under the Tranche B-1 Term
Facility bore interest at LIBOR plus an applicable margin of 3.00%, borrowings under the Tranche B-2 Term
Facility bore interest at LIBOR plus an applicable margin of 3.25% and borrowings under the Revolving Facility
bore interest at LIBOR plus an applicable margin of 2.50%. As of the end of fiscal 2015, we had $48.0 million
outstanding under the Revolving Facility. As of the end of fiscal 2015, we had in effect an interest rate swap with
a notional amount totaling $1.5 billion to hedge a portion of our variable rate debt. As of such date, we had
$2,234.6 million of variable rate debt, of which $0.7 million remained unhedged.
In January 2009, the Company entered into a forward-starting interest rate swap which had an effective date
of January 4, 2010 and a termination date of January 27, 2014. From December 29, 2012 through April 1, 2013,
this swap had qualified for hedge accounting, and therefore changes in the fair value of this derivative were
recorded in accumulated other comprehensive income (loss). Effective April 2, 2013, due to the Company’s debt
refinancing, the Company ceased the application of hedge accounting for this swap. Accordingly, changes in the
fair value of this swap were recorded in earnings subsequent to April 2, 2013 and were immaterial for the fiscal
year ended January 3, 2015.
On July 26, 2013, in order to hedge an additional portion of its variable rate debt, the Company entered into
a forward-starting interest rate swap with an effective date of March 31, 2014 and a termination date of April 2,
2020. The initial notional amount of this swap was $1.5 billion. During the term of this swap, the notional
amount will decrease from $1.5 billion effective March 31, 2014 to $1.25 billion on April 3, 2017 with a further
reduction to $1.0 billion on April 1, 2019. This interest rate swap effectively fixes the variable interest rate on the
notional amount of this swap at 2.38%. This swap qualifies for hedge accounting and, therefore, changes in the
fair value of this swap have been recorded in accumulated other comprehensive income (loss).
At the end of fiscal 2015, borrowings under (a) the Tranche B-1 Term Facility bore interest at LIBOR plus
an applicable margin of 3.00% and (b) the Tranche B-2 Term Facility bore interest at LIBOR plus an applicable
margin of 3.25%. For the Tranche B-2 Term Facility, the minimum interest rate for LIBOR applicable to such
facility pursuant to the terms of the Credit Agreement is set at 0.75%, referred to herein as the B-2 LIBOR Floor.
In addition, at the end of fiscal 2015, our interest rate swap in effect had a notional amount of $1.5 billion.
Accordingly, as of the end of fiscal 2015, based on the amount of variable rate debt including the impact of the
interest rate swap and the B-2 LIBOR Floor, a hypothetical 50 basis point increase in interest rates would
increase annual interest expense by approximately $2.9 million and a hypothetical 50 basis point decrease in
interest rates would decrease annual interest expense by approximately $0.6 million. This increase or decrease is
primarily driven by our Tranche B-1 Term Facility which had no interest rate swap associated with it and was not
subject to the B-2 LIBOR Floor.
There have been no material changes to the Company’s exposure to market risk from the end of fiscal 2014
as compared to the end of fiscal 2015.
Foreign Currency Risk
Other than inter-company transactions between our domestic and foreign entities, we generally do not have
significant transactions that are denominated in a currency other than the functional currency applicable to each
entity. As a result, substantially all of our revenues and expenses in each jurisdiction in which we operate are in
the same functional currency. In general, we are a net receiver of currencies other than the US dollar.
Accordingly, changes in exchange rates may negatively affect our revenues and gross margins as expressed in
US dollars. In the future, we may enter into forward and swap contracts to hedge transactions denominated in
foreign currencies to reduce the currency risk associated with fluctuating exchange rates. Realized and unrealized
gains and losses from any of these transactions may be included in net income for the period.
Fluctuations in currency exchange rates, particularly with respect to the euro, canadian dollar and pound
sterling, may impact our shareholders’ equity. The assets and liabilities of our non-US subsidiaries are translated
into US dollars at the exchange rates in effect at the balance sheet date. Revenues and expenses are translated
into US dollars at the average exchange rate for the period. The resulting translation adjustments are recorded in
shareholders’ equity as a component of accumulated other comprehensive loss. In addition, exchange rate
fluctuations will cause the US dollar translated amounts to change in comparison to prior periods.
68
Item 8.
Financial Statements and Supplementary Data
This information is incorporated by reference to our consolidated financial statements on pages F-1 through
F-40 and our financial statement schedule on page S-1, including the report thereon of PricewaterhouseCoopers
LLP on page F-2.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be
disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is
accumulated and communicated to our management, including our principal executive officer and principal
financial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the
desired control objectives. Our management, with the participation of our principal executive officer and principal
financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and
procedures as of January 2, 2016, the end of fiscal 2015. Based upon that evaluation and subject to the foregoing,
our principal executive officer and principal financial officer concluded that, as of the end of fiscal 2015, the design
and operation of our disclosure controls and procedures were effective at the reasonable assurance level.
Internal Control Over Financial Reporting
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is a process designed under the supervision and with the
participation of our management, including our principal executive officer and principal financial officer, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting principles generally accepted in the United States
of America (“GAAP”).
Our management assessed the effectiveness of our internal control over financial reporting as of January 2,
2016, the end of fiscal 2015. In making this assessment, our management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated
Framework (2013). Based on this assessment, our management, under the supervision and with the participation
of our principal executive officer and principal financial officer, concluded that, as of January 2, 2016, our
internal control over financial reporting was effective based on those criteria.
The effectiveness of our internal control over financial reporting as of January 2, 2016 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 Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during our most recent
fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
Item 9B. Other Information
None.
69
PART III
Items 10, 11, 12, 13 and 14. Directors, Executive Officers and Corporate Governance; Executive
Compensation; Security Ownership of Certain Beneficial Owners and
Management and Related Shareholder Matters; Certain Relationships and
Related Transactions, and Director Independence; Principal Accountant
Fees and Services
Information called for by Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K is
incorporated by reference from our definitive Proxy Statement to be filed in connection with our 2016 Annual
Meeting of Shareholders pursuant to Regulation 14A, except that (i) certain of the information regarding our
directors and executive officers called for by Items 401(a), (b) and (e) of Regulation S-K has been included in
Part I of this Annual Report on Form 10-K; (ii) the information regarding certain Company equity compensation
plans called for by Item 201(d) of Regulation S-K is set forth below and (iii) the information regarding our
Amended and Restated Code of Business Conduct and Ethics, or the Code of Business Conduct and Ethics,
called for by Item 406 of Regulation S-K is set forth below.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table summarizes our equity compensation plan information as of January 2, 2016:
Equity Compensation Plan Information
Number of securities
to be issued upon exercise
of outstanding options,
warrants and rights(1)
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights(2)
(b)
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column (a))(3)
(c)
Plan category
Equity compensation plans approved by
security holders . . . . . . . . . . . . . . . . . . .
6,603,327
Equity compensation plans not approved
by security holders . . . . . . . . . . . . . . . . .
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,603,327
$9.52
—
$9.52
1,133,985
—
1,133,985
(1) Consists of 1,816,513 shares of our common stock issuable upon the exercise of outstanding options awarded under our Amended and
Restated 2014 Stock Incentive Plan, or 2014 Plan, our 2008 Stock Incentive Plan, or 2008 Plan, and our 2004 Stock Incentive Plan, or
2004 Plan; 3,513,468 shares of our common stock issuable upon the exercise of the Winfrey Option granted pursuant to the Winfrey
Option Agreement; and 1,273,346 shares of our common stock issuable upon the vesting of restricted stock units awarded under our
2014 Plan, 2008 Plan and 2004 Plan. The Winfrey Option was approved by the written consent of Artal Luxembourg which, as of the
date thereof, controlled a majority of the voting power of our outstanding common stock. For additional details on the Winfrey Option
and Winfrey Option Agreement, see “Item 1. Business—History—Winfrey Transaction” of this Annual Report on Form 10-K.
Includes weighted average exercise price of outstanding stock options of $11.79 and restricted stock units of $0.
(2)
(3) Consists of shares of our common stock issuable under our 2014 Plan pursuant to various awards the Compensation and Benefits
Committee may make, including non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock units,
restricted stock and other equity-based awards. In connection with the initial approval of our 2014 Plan on May 6, 2014, the 2014 Plan
replaced the 2004 Plan and the 2008 Plan with respect to prospective equity grants.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics for our officers, including our principal executive
officer, principal financial officer, principal accounting officer or controller, and our employees and directors.
Our Code of Business Conduct and Ethics is available on our website at www.weightwatchersinternational.com.
70
In addition to any disclosures required 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, and that relates to any element of the code of ethics definition enumerated in Item 406(b) of
Regulation S-K, will be disclosed on our website at www.weightwatchersinternational.com within four business
days of the date of such amendment or waiver. In the case of a waiver, the name of the person to whom the
waiver was granted will also be disclosed on our website within four business days of the date of such waiver.
71
Item 15. Exhibits and Financial Statement Schedules
1.
Financial Statements
PART IV
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 statement schedule listed in the Index to Financial Statements and Financial Statement
Schedule on page F-1 is filed as part of this Annual Report on Form 10-K.
3.
Exhibits
The exhibits listed in the Exhibit Index are filed as part of this Annual Report on Form 10-K.
72
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE COVERED BY
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Items 15(a) (1) & (2)
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets at January 2, 2016 and January 3, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pages
F-2
F-3
Consolidated Statements of Income for the fiscal years ended January 2, 2016, January 3, 2015 and
December 28, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-4
Consolidated Statements of Comprehensive Income for the fiscal years ended January 2, 2016, January 3,
2015 and December 28, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-5
Consolidated Statements of Changes in Total Deficit for the fiscal years ended January 2, 2016,
January 3, 2015 and December 28, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-6
Consolidated Statements of Cash Flows for the fiscal years ended January 2, 2016, January 3, 2015 and
December 28, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-7
F-8
Schedule II—Valuation and Qualifying Accounts and Reserves for the fiscal years ended January 2,
2016, January 3, 2015 and December 28, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S-1
All other schedules are omitted for the reason that they are either not required, not applicable, not material
or the information is included in the consolidated financial statements or notes thereto.
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Weight Watchers International, Inc.
In our opinion, the consolidated financial statements listed in the accompanying index appearing on
page F-1 present fairly, in all material respects, the financial position of Weight Watchers International, Inc. and
its subsidiaries (the “Company”) at January 2, 2016 and January 3, 2015, and the results of their operations and
their cash flows for each of the three years in the period ended January 2, 2016 in conformity with accounting
principles generally accepted in the United States of America. In addition, in our opinion, the financial statement
schedule listed in the accompanying index presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of January 2,
2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible
for these financial statements and financial statement schedule, for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under
Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement
schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 2, 2016
F-2
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AT
(IN THOUSANDS)
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables (net of allowances: January 2, 2016—$2,226 and January 3,
2015—$3,287) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Franchise rights acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks and other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred financing costs, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 2,
2016
January 3,
2015
$
241,526
$
301,212
29,281
27,838
7,516
52,812
358,973
58,186
747,326
159,331
66,339
25,209
6,720
31,960
32,382
23,744
36,367
425,665
74,650
760,883
168,279
68,115
32,742
4,306
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,422,084
$ 1,534,640
LIABILITIES AND TOTAL DEFICIT
CURRENT LIABILITIES
Portion of long-term debt due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries and wages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued marketing and advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
213,323
38,225
47,042
21,554
20,739
56,477
44,170
61,597
80,728
52,411
64,785
20,540
22,965
81,653
42,423
66,190
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
503,127
2,021,250
159,539
23,876
431,695
2,277,272
176,278
16,883
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,707,792
2,902,128
Commitments and contingencies (Note 14)
Redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL DEFICIT
Common stock, $0 par value; 1,000,000 shares authorized; 118,855 shares
4,450
5,553
issued at January 2, 2016 and 112,195 shares issued at January 3, 2015 . . . . .
0
0
Treasury stock, at cost, 55,301 shares at January 2, 2016 and 55,485 shares at
January 3, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,247,406)
1,994,513
(37,265)
(3,253,597)
1,900,506
(19,950)
TOTAL DEFICIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,290,158)
(1,373,041)
TOTAL LIABILITIES AND TOTAL DEFICIT . . . . . . . . . . . . . . . . . . . . .
$ 1,422,084
$ 1,534,640
The accompanying notes are an integral part of the consolidated financial statements.
F-3
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME FOR THE FISCAL YEARS ENDED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Service revenues, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product sales and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 2,
2016
January 3,
2015
(52 weeks)
$ 937,368
227,051
(53 weeks)
$1,181,945
297,971
December28,
2013
(52 weeks)
$1,360,761
363,362
Revenues, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,164,419
1,479,916
1,724,123
Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of product sales and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on Brazil acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss attributable to the noncontrolling interest . . . . . . . . . . . . . . . . . .
477,926
112,406
590,332
574,087
201,021
205,008
168,058
121,843
2,027
0
(11,426)
55,614
22,835
32,779
166
535,320
142,045
677,365
802,551
262,258
240,979
299,314
122,984
3,206
(10,540)
0
183,664
65,931
117,733
54
558,451
164,560
723,011
1,001,112
295,628
247,732
457,752
103,108
599
0
21,685
332,360
129,618
202,742
0
Net income attributable to Weight Watchers International, Inc.
. . .
$
32,945
$ 117,787
$ 202,742
Earnings Per Share attributable to Weight Watchers International, Inc.
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
0.56
0.56
$
$
2.08
2.08
$
$
3.61
3.60
Weighted average common shares outstanding
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
58,369
58,966
56,607
56,705
56,144
56,394
Dividends declared per common share . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
0.00
$
0.00
$
0.53
The accompanying notes are an integral part of the consolidated financial statements.
F-4
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE FISCAL YEARS ENDED
(IN THOUSANDS)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss:
January 2,
2016
(52 weeks)
$ 32,779
January 3,
2015
(53 weeks)
$117,733
December 28,
2013
(52 weeks)
$202,742
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . .
Income tax effect on foreign currency translation losses . . . . . . . . . . . .
(27,824)
10,851
(19,167)
7,475
(10,363)
4,022
Foreign currency translation adjustments, net of taxes . . . . . . . . . . . . . .
(16,973)
(11,692)
Changes in (loss) gain on derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit (expense) on gain (loss) on derivatives . . . . . . . . . .
(2,096)
817
(28,283)
11,030
Changes in (loss) gain on derivatives, net of taxes . . . . . . . . . . . . . . . . .
(1,279)
(17,253)
(6,341)
3,277
(1,278)
1,999
Total other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(18,252)
(28,945)
(4,342)
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net loss attributable to the noncontrolling interest . . . . . . . . . . . .
Less: Foreign currency translation losses, net of taxes attributable to
the noncontrolling interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive loss attributable to the noncontrolling interest . . . . . . . . . . .
14,527
166
88,788
54
198,400
0
937
1,103
478
532
0
0
Comprehensive income attributable to Weight Watchers International,
Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 15,630
$ 89,320
$198,400
The accompanying notes are an integral part of the consolidated financial statements.
F-5
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL DEFICIT
(IN THOUSANDS)
Weight Watchers International, Inc.
Redeemable
Noncontrolling
Interest
Common Stock
Treasury Stock
Shares Amount Shares Amount
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
Balance at December 29, 2012 . . . . . . . . . . . . . .
$
Comprehensive (Loss) Income . . . . . . . . . . . . . .
Issuance of treasury stock under stock plans . . . .
Tax benefit of restricted stock units vested and
stock options exercised . . . . . . . . . . . . . . . . . .
Cash dividends declared . . . . . . . . . . . . . . . . . . .
Compensation expense on share-based awards . .
0
0
111,988
$0
56,234 $(3,281,831)
$ 12,859
$1,603,513 $(1,665,459)
(672)
25,425
(4,342)
202,742
(10,304)
198,400
15,121
537
(29,459)
4,255
537
(29,459)
4,255
Balance at December 28, 2013 . . . . . . . . . . . . . .
$
0
111,988
$0
55,562 $(3,256,406)
$ 8,517
$1,771,284 $(1,476,605)
Comprehensive (Loss) Income . . . . . . . . . . . . . .
Issuance of treasury stock under stock plans . . . .
Tax benefit of restricted stock units vested and
stock options exercised . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation expense on share-based
awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of Wello . . . . . . . . . . . . . . . . . . . . . .
Acquisition of Additional Equity Interest in
Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution to noncontrolling interest
. . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(532)
6,157
(75)
3
207
(77)
2,809
(28,467)
117,787
(2,559)
89,320
250
(788)
42
(788)
42
10,533
4,207
10,533
4,207
Balance at January 3, 2015 . . . . . . . . . . . . . . . . .
$ 5,553
112,195
$0
55,485 $(3,253,597)
$(19,950)
$1,900,506 $(1,373,041)
Comprehensive (Loss) Income . . . . . . . . . . . . . .
Issuance of treasury stock under stock plans . . . .
Tax benefit of restricted stock units vested and
stock options exercised . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation expense on share-based
awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of common stock . . . . . . . . . . . . . . . . . . . . .
Acquisition of Weilos . . . . . . . . . . . . . . . . . . . . .
(1,103)
(184)
6,191
(17,315)
32,945
(7,179)
15,630
(988)
6,362
298
(932)
3
(932)
3
24,771
41,475
2,924
24,771
41,475
2,924
Balance at January 2, 2016 . . . . . . . . . . . . . . . . .
$ 4,450
118,855
$0
55,301 $(3,247,406)
$(37,265)
$1,994,513 $(1,290,158)
The accompanying notes are an integral part of the consolidated financial statements.
F-6
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED
(IN THOUSANDS)
January 2,
2016
January 3,
2015
December 28,
2013
(52 Weeks)
(53 Weeks)
(52 Weeks)
Operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to cash provided by operating activities:
$ 32,779
$117,733
$
202,742
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of intangible and long-lived assets . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for inventory obsolescence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency exchange rate loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on Brazil acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on early extinguishment of debt
. . . . . . . . . . . . . . . . . . . . . . . .
Other items, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in cash due to:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UK self-employment liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53,171
6,886
2,455
24,771
12,098
(446)
7,593
1,526
0
0
(12,667)
0
1,571
(3,055)
(18,284)
(13,930)
0
(30,906)
1,256
(10,003)
49,234
9,305
652
10,533
29,099
99
11,822
2,984
(10,540)
171
0
(184)
3,777
(3,218)
1,341
7,807
0
10,361
(7,915)
(1,442)
47,909
7,672
5,426
4,255
34,358
596
9,580
659
0
1,417
21,685
0
345
(2,226)
1,037
(3,607)
(7,272)
4,988
(10,521)
4,473
Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
54,815
231,619
323,516
Investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized software expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other items, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,952)
(32,307)
(3,112)
(936)
(9,097)
(42,589)
(16,678)
(628)
(40,657)
(21,277)
(83,825)
411
Cash used for investing activities
(40,307)
(68,992)
(145,348)
Financing activities:
Proceeds from new term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings on revolver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the sale of common stock, net of fees . . . . . . . . . . . . . . . . . . . . .
Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from stock options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit of restricted stock units vested and stock options exercised . . . . . .
0
48,000
(158,113)
(42)
41,475
0
95
0
0
0
(30,000)
(80)
0
0
658
1
2,400,000
70,000
(2,488,364)
(29,571)
0
(44,817)
16,187
2,132
Cash used for financing activities
(68,585)
(29,421)
(74,433)
Effect of exchange rate changes on cash and cash equivalents and other . . . . . . . . . .
(5,609)
(6,551)
Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents, beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . .
(59,686)
301,212
126,655
174,557
607
104,342
70,215
Cash and cash equivalents, end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 241,526
$301,212
$
174,557
The accompanying notes are an integral part of the consolidated financial statements.
F-7
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of Weight Watchers International,
Inc. and all of its subsidiaries. The terms “Company” and “WWI” as used throughout these notes is used to
indicate Weight Watchers International, Inc. and all of its operations consolidated for purposes of its financial
statements. The Company’s “meetings” business refers to providing access to meetings to the Company’s
monthly commitment plan subscribers, “pay-as-you-go” members, Total Access subscribers and other meeting
members. “Online” refers to Weight Watchers Online, Weight Watchers OnlinePlus, Personal Coaching and
other digital subscription products.
The consolidated financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America (“GAAP”) and include all of the Company’s majority-owned
subsidiaries. As further discussed in Note 4, (1) as a result of the acquisition of an additional equity interest in
Vigilantes do Peso Marketing Ltda. (“VPM”) in March 2014, the Company gained a direct controlling financial
interest in VPM and began to consolidate this entity as of the date of acquisition; (2) as a result of the acquisition
of Knowplicity, Inc., d/b/a Wello, in April 2014, Wello became a wholly owned subsidiary of the Company and
the Company began to consolidate the entity as of the date of acquisition and (3) as a result of the acquisition of
Weilos, Inc. (“Weilos”), in March 2015, Weilos became a wholly owned subsidiary of the Company and the
Company began to consolidate the entity as of the date of acquisition. All intercompany accounts and
transactions have been eliminated in consolidation.
Out-of-Period Adjustments:
In fiscal 2015, the Company identified and recorded out-of-period adjustments related to immaterial errors
in prior period financial statements that increased income before income taxes by $1,650, provision for income
taxes by $1,970, and decreased net income attributable to the Company by $320.
2. Summary of Significant Accounting Policies
Fiscal Year:
The Company’s fiscal year ends on the Saturday closest to December 31st and consists of either 52 or
53-week periods. Fiscal year 2015 contained 52 weeks, fiscal year 2014 contained 53 weeks and fiscal year 2013
contained 52 weeks. In 2014, when the Company realigned its organizational structure and changed the
determination of its reportable segments, the Company’s Online business accordingly changed its fiscal year end
to be the same as the Company’s fiscal year end, which did not have a material effect on the consolidated
financial statements. See Note 15 for further information on the Company’s reportable segments. In fiscal year
2013, the Company’s Online business’ fiscal year ended on December 31st. This difference in fiscal years did not
have a material effect on the consolidated financial statements.
Use of Estimates:
The preparation of financial statements, in conformity with GAAP, requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the
reporting period. On an ongoing basis, the Company evaluates its estimates and judgments, including those
related to inventories, the impairment analysis for goodwill and other indefinite-lived intangible assets, share-
based compensation, income taxes, tax contingencies and litigation. The Company bases its estimates on
historical experience and on various other factors and assumptions that it believes to be reasonable under the
F-8
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual amounts could differ from these estimates.
Translation of Foreign Currencies:
For all foreign operations, the functional currency is the local currency. Assets and liabilities of these
operations are translated into US dollars using the exchange rate in effect at the end of each reporting period.
Income statement accounts are translated at the average rate of exchange prevailing during each reporting period.
Translation adjustments arising from the use of differing exchange rates from period to period are included in
accumulated other comprehensive income (loss).
Foreign currency gains and losses arising from the translation of intercompany receivables and
intercompany payables with the Company’s international subsidiaries are recorded as a component of other
expense (income), net, unless the receivable is considered long-term in nature, in which case the foreign currency
gains and losses are recorded as a component of accumulated other comprehensive income (loss).
Cash Equivalents:
Cash and cash equivalents are defined as highly liquid investments with original maturities of three months
or less. Cash balances may, at times, exceed insurable amounts. The Company believes it mitigates this risk by
investing in or through major financial institutions. Cash includes balances due from third-party credit card
companies.
Inventories:
Inventories, which consist of finished goods, are stated at the lower of cost or market on a first-in, first-out
basis, net of reserves for obsolescence and shrinkage.
Property and Equipment:
Property and equipment are recorded at cost. For financial reporting purposes, equipment is depreciated on
the straight-line method over the estimated useful lives of the assets (3 to 10 years). Leasehold improvements are
amortized on the straight-line method over the shorter of the term of the lease or the useful life of the related
assets. Expenditures for new facilities and improvements that substantially extend the useful life of an asset are
capitalized. Ordinary repairs and maintenance are expensed as incurred. When assets are retired or otherwise
disposed of, 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 indicate that the carrying amount of the assets may not be fully
recoverable.
In fiscal 2015, the Company recorded an impairment charge of $2,028 related to internal-use computer
software that was not expected to provide substantive service potential.
In fiscal 2015 and fiscal 2014, the Company recorded impairment charges of $427 and $652, respectively,
related to property, plant and equipment that were expected to be disposed of before the end of their estimated
useful lives.
F-9
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
In fiscal 2013, the Company commenced the shutdown of its China operations and, as a result, recorded an
impairment charge of $1,607 related to property, plant and equipment ($372) and amortizable intangible assets
($1,235). The Company also recorded an impairment charge of $2,653 in fiscal 2013 related to internal-use
computer software that was not expected to provide substantive service potential.
Goodwill and Franchise Rights Acquired and Other Intangible Assets:
Finite-lived intangible assets are amortized using the straight-line method over their estimated useful lives
of 3 to 20 years or, in the case of amortizable franchise rights acquired, over the remaining contractual period,
which is generally less than one year.
The Company reviews goodwill and other indefinite-lived intangible assets, including franchise rights
acquired with indefinite lives, for potential impairment on at least an annual basis or more often if events so
require. The Company performed fair value impairment testing as of the end of fiscal 2015 and fiscal 2014 on its
goodwill and other indefinite-lived intangible assets.
In performing the impairment analysis for the fiscal year ended January 2, 2016 and for the fiscal year
ended January 3, 2015, the Company determined that the carrying amounts of its franchise rights acquired with
indefinite lives did not exceed their respective fair values and therefore, no impairment existed. In performing the
impairment analysis for the fiscal year ended December 28, 2013, the Company determined that, based on the
fair values calculated, the carrying amounts of the indefinite-lived franchise rights acquired related to its Mexico
and Hong Kong operations exceeded their respective fair values and recorded impairment charges of $935 and
$231, respectively. The Company determined that the carrying amounts of the remainder of its franchise rights
acquired with indefinite lives did not exceed their respective fair values as of the end of fiscal 2013, and
therefore, no other impairment existed.
When determining fair value, the Company utilizes various assumptions, including projections of future
cash flows, growth rates and discount rates. A change in these underlying assumptions will cause a change in the
results of the tests and, as such, could cause fair value to be less than the carrying amounts and result in an
impairment of those assets. In the event such a result occurred, the Company would be required to record a
corresponding charge, which would impact earnings. The Company would also be required to reduce the carrying
amounts of the related assets on its balance sheet. The Company continues to evaluate these estimates and
assumptions and believes that these assumptions are appropriate.
The following is a discussion of the goodwill and franchise rights acquired impairment analysis.
Goodwill
In performing the impairment analysis for goodwill, the fair value for the Company’s reporting units is
estimated using a discounted cash flow approach. This approach involves projecting future cash flows
attributable to the reporting unit and discounting those estimated cash flows using an appropriate discount rate.
The estimated fair value is then compared to the carrying value of the reporting unit. The Company has
determined the appropriate reporting unit for purposes of assessing annual impairment to be the country for all
reporting units. To date, the Company has not recorded an impairment of goodwill.
For all of the Company’s reporting units except for Brazil (see below), the Company estimated future cash
flows by utilizing the historical debt-free cash flows attributable to that country and then applied expected future
operating income growth rates for such country. The Company utilized operating income as the basis for
measuring its potential growth because it believes it is the best indicator of the performance of its business. The
F-10
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Company then discounted the estimated future cash flows utilizing a discount rate which was calculated using the
average cost of capital, which included the cost of equity and the cost of debt. The cost of equity was determined
by combining a risk-free rate of return and a market risk premium for the Company’s peer group. The risk-free
rate of return was generally determined based on the average rate of long-term U.S. Treasury securities. The
market risk premium was generally determined by reviewing external market data. The cost of debt was
determined by estimating the Company’s current borrowing rate.
As it relates to the impairment analysis for Brazil, the Company estimated future debt-free cash flows in
contemplation of its growth strategies for that market. In developing these projections, the Company considered
the historical impact of similar growth strategies in other markets as well as the current market conditions in
Brazil. The Company then discounted the estimated future cash flows utilizing a discount rate which was
calculated using the average cost of capital, which included the cost of equity and the cost of debt. The cost of
equity was determined by combining a risk-free rate of return and a market risk premium for the Company’s peer
group. The risk-free rate of return was generally determined based on the average rate of long-term U.S. Treasury
securities. The market risk premium was generally determined by reviewing external market data. Additional
consideration was given to the current economic conditions in Brazil and country specific risk as well as the rate
of growth projected in the analysis. The cost of debt was determined by estimating the Company’s current
borrowing rate.
Franchise Rights Acquired
In performing the impairment analysis for indefinite-lived franchise rights acquired, the fair value for
franchise rights acquired is estimated using a discounted cash flow approach referred to as the hypothetical start-
up approach for franchise rights related to the Company’s meetings business and a relief from royalty
methodology for franchise rights related to the Company’s Online business. The aggregate estimated fair value
for these rights is then compared to the carrying value of the unit of accounting for those franchise rights. The
Company has determined the appropriate unit of account for purposes of assessing annual impairment to be the
combination of the rights in the meetings and Online businesses in the country in which the acquisitions have
occurred. The values of these franchise rights in the United States, Canada, United Kingdom, Australia, New
Zealand and other countries at January 2, 2016 were $675,515, $48,435, $11,858, $6,563, $4,833, and $122,
respectively, totaling $747,326 and the values at January 3, 2015 were $675,515, $57,579, $13,138, $7,272,
$5,449 and $1,930, respectively, totaling $760,883.
The Company estimated future cash flows for each unit of accounting by utilizing a hypothetical start-up
approach in which it assumed that the year of maturity was reached after 7 years. Subsequent to the year of
maturity, the Company assumed debt-free cash flow growth rates based on its expected future operating income
growth rates for such country. The Company utilized operating income as the basis for measuring its potential
growth because it believes it is the best indicator of the performance of its business. The Company then
discounted the estimated future cash flows utilizing discount rates consistent with those used in its goodwill
impairment analysis as discussed above.
Other Intangible Assets
The Company expenses all software costs (including website development costs) incurred during the
preliminary project stage and capitalizes all internal and external direct costs of materials and services consumed
in developing software (including website development costs) once the development has reached the application
development stage. Application development stage costs generally include software configuration, coding,
installation to hardware and testing. These costs are amortized over their estimated useful life of 3 years for
website development costs and from 3 to 5 years for all other software costs. All costs incurred for upgrades,
F-11
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
maintenance and enhancements, including the cost of website content, which do not result in additional
functionality, are expensed as incurred.
Revenue Recognition:
WWI earns revenue by conducting meetings, for which it charges a fee, predominantly through monthly
commitment plans, prepayment plans or the “pay-as-you-go” arrangement. WWI also earns revenue from
monthly subscriptions for its Online products, selling products in its meetings, on the Internet and to its
franchisees, collecting commissions from franchisees, collecting royalties related to licensing agreements, selling
magazine subscriptions, selling advertising space on its website and in copies of its magazines, ecommerce fees
and By Mail product sales.
Monthly commitment plans, prepaid meeting fees and magazine subscription revenue is recorded to
deferred revenue and amortized into revenue over the period earned. Online Subscription Revenues, consisting of
the fees associated with subscriptions for the Company’s Online subscription products, including its Personal
Coaching product, are recognized over the period that products are provided. One-time sign-up fees are deferred
and recognized over the expected customer relationship period. Online Subscription Revenues that are paid in
advance are deferred and recognized on a straight-line basis over the subscription period. Revenue from “pay-as-
you-go” meeting fees, product sales, ecommerce fees, By Mail, commissions and royalties is recognized when
services are rendered, products are shipped to customers and title and risk of loss pass to the customers, and
commissions and royalties are earned, respectively. Revenue from advertising in magazines is recognized when
advertisements are published. Revenue from magazine sales is recognized when the magazine is sent to the
customer. In the meetings business, WWI generally charges non-refundable registration and starter fees in
exchange for an introductory information session and materials it provides to new members. Revenue from these
registration and starter fees is recognized when the service and products are provided, which is generally at the
same time payment is received from the customer. Discounts to customers, including free registration offers, are
recorded as a deduction from gross revenue in the period such revenue was recognized. Revenue from
advertising on its website is recognized when the advertisement is viewed by the user.
The Company grants refunds in aggregate amounts that historically have not been material. Because the
period of payment of the refund generally approximates the period revenue was originally recognized, refunds
are recorded as a reduction of revenue when paid.
Advertising Costs:
Advertising costs consist primarily of television and digital media. All costs related to advertising are
expensed in the period incurred, except for media production-related costs, which are expensed the first time the
advertising takes place. Total advertising expenses for the fiscal years ended January 2, 2016, January 3, 2015
and December 28, 2013 were $191,060, $251,954, and $285,298, respectively.
Income Taxes:
Deferred income tax assets and liabilities result primarily from temporary differences between the financial
statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which differences
are expected to reverse. If it is more-likely-than-not that some portion of a deferred tax asset will not be realized,
a valuation allowance is recognized. The Company considers historic levels of income, estimates of future
taxable income and feasible tax planning strategies in assessing the need for a tax valuation allowance.
F-12
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The Company recognizes a benefit for uncertain tax positions when a tax position taken or expected to be
taken in a tax return is more-likely-than-not to be sustained upon examination by taxing authorities. The amount
recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon
ultimate settlement. The Company recognizes accrued interest and penalties associated with uncertain tax
positions as part of the provision for income taxes on its consolidated statements of income.
In addition, assets and liabilities acquired in purchase business combinations are assigned their fair values
and deferred taxes are provided for lower or higher tax bases.
Derivative Instruments and Hedging:
The Company is exposed to certain risks related to its ongoing business operations, primarily interest rate
risk and foreign currency risk. The primary risk managed by using derivative instruments is interest rate risk.
Interest rate swaps are entered into to hedge a portion of the cash flow exposure associated with the Company’s
variable-rate borrowings. The Company does not use any derivative instruments for trading or speculative
purposes.
The Company recognizes the fair value of all derivative instruments as either assets or liabilities on the
balance sheet. The Company has designated and accounted for interest rate swaps as cash flow hedges of its
variable-rate borrowings. For derivative instruments that are designated and qualify as cash flow hedges, the
effective portion of the gain or loss on the derivative is reported as a component of accumulated other
comprehensive income (loss) and reclassified into earnings in the periods during which the hedged transactions
affect earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components
excluded from the assessment of effectiveness are recognized in current earnings.
The fair value of the Company’s interest rate swaps is reported in derivative payable and prepaid expenses
and other current assets on its balance sheet. See Note 16 for a further discussion regarding the fair value of the
Company’s interest rate swaps. The net effect of the interest payable and receivable under the Company’s
interest rate swaps is included in interest expense on the statement of income.
Deferred Financing 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 January 2, 2016, in connection with
the prepayment of debt, the Company wrote-off deferred financing fees of approximately $647, recorded a gain
on early extinguishment of debt totaling $11,426, and incurred additional fees of approximately $1,241. During
the fiscal year ended January 3, 2015, the Company wrote-off deferred financing fees of approximately $1,583 in
connection with amending its Credit Agreement (as defined in Note 7). During the fiscal year ended
December 28, 2013, the Company incurred fees of $44,817 associated with the refinancing of the WWI Credit
Facility (as defined in Note 7). The Company wrote-off fees in connection with this refinancing which resulted in
the Company recording a charge of $21,685 in early extinguishment of debt. Amortization expense for the fiscal
years ended January 2, 2016, January 3, 2015 and December 28, 2013 was $6,886, $9,305 and $7,672,
respectively.
Accumulated Other Comprehensive Loss:
The Company’s accumulated other comprehensive loss includes net income, changes in the fair value of
derivative instruments and the effects of foreign currency translations. At January 2, 2016, January 3, 2015 and
F-13
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
December 28, 2013 the cumulative balance of changes in fair value of derivative instruments, net of taxes, was
$(23,135), $(21,856) and $(4,603), respectively. At January 2, 2016, January 3, 2015 and December 28, 2013, the
cumulative balance of the effects of foreign currency translations, net of taxes, was $(14,130) and $1,906 and
$13,120, respectively.
Restructuring Expense:
The Company records estimated expense for restructuring initiatives when such costs are deemed probable
and estimable, when approved by the appropriate corporate authority and by accumulating detailed estimates of
costs for such plans. These expenses include the estimated costs of employee severance and related benefits,
impairment or accelerated depreciation of property, plant and equipment and capitalized software, and any other
qualifying exit costs. Such costs represent the Company’s best estimate, but require assumptions about the plans
that may change over time, including attrition rates. Estimates are evaluated periodically to determine whether an
adjustment is required.
Reclassification:
Certain prior year amounts have been reclassified to conform to the current year presentation.
3. Winfrey Transaction
On October 18, 2015 (the “Agreement Date”), the Company entered into the following agreements with
Oprah Winfrey: a Strategic Collaboration Agreement, the Winfrey Purchase Agreement (defined below), and the
Winfrey Option Agreement (defined below). The transactions contemplated by these agreements are collectively
referred to herein as the “Winfrey Transaction”. Details of the Strategic Collaboration Agreement, Winfrey
Purchase Agreement and Winfrey Option Agreement are below. See Note 21 for related party transactions with
Ms. Winfrey.
Strategic Collaboration Agreement
The Company and Ms. Winfrey granted each other certain intellectual property rights under the Strategic
Collaboration Agreement. The agreement has an initial term of five years, with additional successive one-year
renewal terms. During the term of this agreement, Ms. Winfrey will consult with the Company and participate in
developing, planning, executing and enhancing the Weight Watchers program and related initiatives, and provide
it with services in her discretion to promote the Company and its programs, products and services.
Winfrey Purchase Agreement
On October 19, 2015, pursuant to the Share Purchase Agreement between the Company and Ms. Winfrey
(the “Winfrey Purchase Agreement”), the Company issued and sold to Ms. Winfrey an aggregate of 6,362 shares
of the Company’s common stock (the “Purchased Shares”) at a price per share of $6.79 for an aggregate cash
purchase price of $43,199. The Company recorded fees related to the issuance of the Purchased Shares totaling
$2,315, of which $1,700 was recorded as a reduction of equity. The Purchased Shares are subject to certain
demand registration rights and piggyback rights held by Ms. Winfrey under the Winfrey Purchase Agreement.
The Purchased Shares may not be transferred by Ms. Winfrey within the first two years of the Agreement
Date, subject to certain limited exceptions. Thereafter, Ms. Winfrey may generally transfer up to 15% of the
F-14
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Purchased Shares prior to the third anniversary of the Agreement Date, up to 30% prior to the fourth anniversary
of the Agreement Date and up to 60% prior to the fifth anniversary of the Agreement Date. On or after the fifth
anniversary of the Agreement Date, Ms. Winfrey will be permitted to transfer all of the Purchased Shares. In the
event that Ms. Winfrey proposes to transfer any Purchased Shares or Winfrey Option Shares (defined below), the
Company will have (a) a right of first offer with respect to such shares if such transfer is (i) for 1% or more of the
Company’s issued and outstanding common stock that is proposed to be made pursuant to Rule 144 under the
Securities Act of 1933, as amended or (ii) proposed to be sold under a resale shelf registration statement or (b) a
right of first refusal with respect to such shares if such transfer is (i) for 1% or more of the Company’s issued and
outstanding common stock and is proposed to be made to a competitor of the Company or (ii) for 5% or more of
the Company’s issued and outstanding common stock. Such transfer restrictions, right of first offer and right of
first refusal terminate if Ms. Winfrey then has the right to be nominated as a director and has met certain
eligibility requirements under the Winfrey Purchase Agreement, but is not elected as a director of the Company.
If Ms. Winfrey is elected as a director of the Company, she shall receive compensation for her services as a
director consistent with that of other non-executive directors of the Company. Such transfer restrictions also
terminate if there is a change of control, including if another person (or group), other than Artal Luxembourg
S.A. and Ms. Winfrey and their respective affiliates, acquires more than 50% of the total voting power of the
Company.
Winfrey Option Agreement
In consideration of Ms. Winfrey entering into the Strategic Collaboration Agreement and the performance
of her obligations thereunder, on the Agreement Date, the Company granted Ms. Winfrey a fully vested option
(the “Winfrey Option”) to purchase 3,513 shares of common stock at an exercise price of $6.97 per share. The
term sheet, and related terms and conditions, for the Winfrey Option are referred to herein as the “Winfrey
Option Agreement”. Based on the Black Scholes option pricing method, the Company recorded $12,759 of
compensation expense in the fourth quarter of fiscal 2015 for the Winfrey Option. At the date of the grant, the
Company used a dividend yield of 0.0%, 63.88% volatility and a risk-free interest rate of 1.36%. Compensation
expense is included as a component of selling, general and administrative expenses.
Subject to certain limited exceptions, shares of common stock issuable upon exercise of the Winfrey Option
(the “Winfrey Option Shares”) generally may not be transferred by Ms. Winfrey within the first year of the
Agreement Date. Thereafter, Ms. Winfrey generally may transfer up to 20% of the Winfrey Option Shares prior
to the second anniversary of the Agreement Date, up to 40% prior to the third anniversary of the Agreement
Date, up to 60% prior to the fourth anniversary of the Agreement Date and up to 80% prior to the fifth
anniversary of the Agreement Date. On or after the fifth anniversary of the Agreement Date, Ms. Winfrey will be
permitted to transfer all of the Winfrey Option Shares. Pursuant to the Winfrey Purchase Agreement, in the event
that Ms. Winfrey proposes to transfer any Winfrey Option Shares, the Company will have a right of first offer or
a right of first refusal with respect to such shares as described above. Such transfer restrictions terminate under
the same director service and change of control circumstances that would result in the termination of the transfer
restrictions relating to the Purchased Shares as described above.
4. Acquisitions and Shutdown of China Operations
Acquisitions of Franchisees
The acquisitions of franchisees have been accounted for under the purchase method of accounting and,
accordingly, earnings of acquired franchisees have been included in the consolidated operating results of the
Company since the applicable date of acquisition. During fiscal 2013, the Company acquired certain assets of its
franchisees as outlined below.
F-15
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
On March 4, 2013, the Company acquired substantially all of the assets of its Alberta and Saskatchewan,
Canada franchisees, Weight Watchers of Alberta Ltd. and Weight Watchers of Saskatchewan Ltd., for an
aggregate purchase price of $35,000. The total purchase price has been allocated to franchise rights acquired
($1,135), goodwill ($34,124), customer relationship value ($473), inventory ($218), fixed assets ($182) and
prepaid expenses ($3) offset by deferred revenue of $1,135. The franchise rights acquired were amortized over a
ten month useful life.
On July 15, 2013, the Company acquired substantially all of the assets of its West Virginia franchisee,
Weight Watchers of West Virginia, Inc., for a net purchase price of $16,028 less assumed assets, plus assumed
liabilities, net of $28. The total purchase price has been allocated to franchise rights acquired ($10,131), goodwill
($5,212), customer relationship value ($448) and fixed assets ($209).
On July 22, 2013, the Company acquired substantially all of the assets of its Columbus, Ohio franchisee,
Weight Watchers of Columbus, Inc., for a net purchase price of $23,357 plus assumed liabilities of $143 and its
Reno, Nevada franchisee, Weight Watchers of Northern Nevada, Inc., for a net purchase price of $3,969 plus
assumed liabilities of $31. The aggregate total purchase price has been allocated to franchise rights acquired
($3,314), goodwill ($23,549), customer relationship value ($494), fixed assets ($116) and inventory ($27). The
franchise rights acquired for the Columbus, Ohio franchise purchase were amortized over a five month useful
life.
On October 28, 2013, the Company acquired substantially all of the assets of its Manitoba, Canada
franchisee, Weight Watchers of Manitoba Ltd., for a net purchase price of $5,197 plus assumed liabilities of
$28 and its Franklin and St. Lawrence Counties, New York franchisee, Weight Watchers of Franklin and St.
Lawrence Counties Inc., for a net purchase price of $274 plus assumed liabilities of $1. The total purchase price
of the Manitoba, Canada franchisee has been allocated to franchise rights acquired ($28), goodwill ($4,946),
customer relationship value ($249), inventory ($1) and prepaid expenses ($1). The franchise rights acquired were
amortized over a two month useful life. The total purchase price of the Franklin and St. Lawrence Counties,
New York franchisee has been allocated to franchise rights acquired ($38), goodwill ($223), customer
relationship value ($13) and prepaid expenses ($1). The franchise rights acquired were amortized over a nine
month useful life.
The weighted-average amortization period of the customer relationships acquired in the above acquisitions
was approximately 15 weeks. Due to the short-term nature of this asset, its estimated fair value has been recorded
as a component of prepaid expenses and other current assets. The acquisitions resulted in goodwill related to,
among other things, expected synergies in operations. The goodwill recorded in connection with these
acquisitions represents the intangible assets that did not qualify for separate recognition in the financial
statements. The Company expects that substantially all of the goodwill recorded in connection with the above
acquisitions will be deductible for tax purposes. The effect of these franchise acquisitions was not material to the
Company’s consolidated financial position, results of operations, or operating cash flows in the periods
presented.
Acquisition of Additional Equity Interest in Brazil
Prior to March 12, 2014, the Company had owned 35% of VPM, a Brazilian limited liability partnership. On
March 12, 2014, the Company acquired an additional 45% equity interest in VPM for a net purchase price of
$14,181 less cash acquired of $2,262. VPM was converted into a joint-stock corporation prior to closing and
subsequently operates as a subsidiary of the Company with rights to conduct typical business lines. As a result of
the acquisition, the Company gained a direct controlling financial interest in VPM and began to consolidate this
entity as of the date of acquisition.
F-16
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The equity interest held immediately before the acquisition was $12. An implied fair value technique was
used to measure acquisition date fair value of the equity interest to be $11,029. As a result of this transaction, the
Company adjusted its previously held equity interest to fair value of $11,017 and recorded a charge of
$477 associated with the settlement of the royalty-free arrangement of the Brazilian partnership. The net effect of
these items resulted in the Company recognizing a gain of $10,540 ($6,429 after tax or $0.11 per fully diluted
share) in the first quarter of fiscal 2014.
The fair value of the redeemable noncontrolling interest has been valued at $6,157. In connection with the
acquisition, a call option and a put option were granted related to the 20% interest in VPM not owned by the
Company.
The net purchase price of the Brazil acquisition has been allocated as follows:
Fair value of consideration transferred:
Net purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$14,181
2,262
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Identifiable assets acquired and liabilities assumed:
Franchise rights acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationship value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax on acquired intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total identifiable net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,919
10,540
6,157
28,616
2,000
1,139
575
421
287
275
199
(1,063)
(680)
(445)
(258)
(91)
2,359
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$26,257
The acquisition resulted in goodwill related to, among other things, expected synergies in operations and the
ability of the Company to provide VPM with various intellectual property and technology innovations which will
afford additional future opportunities in the meetings and Online businesses within the market where VPM
operates. The Company does not expect goodwill to be deductible for tax purposes.
Acquisition of Wello
On April 16, 2014, the Company acquired Knowplicity, Inc., d/b/a Wello, an online fitness and personal
training company for a net purchase price of $8,977 less cash acquired of $11. Payment was in the form of
common stock issued ($4,207) and cash ($4,770). The total purchase price of Wello has been allocated to
F-17
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
goodwill ($6,204), website development ($4,516), prepaid expenses ($4) and fixed assets ($1) offset by deferred
tax liabilities ($1,759). As a result of the acquisition, Wello became a wholly owned subsidiary of the Company
and the Company began to consolidate the entity as of the date of acquisition. The acquisition resulted in
goodwill related to, among other things, expected synergies in operations. The Company does not expect
goodwill to be deductible for tax purposes.
Acquisition of Weilos
On March 11, 2015, the Company acquired for a purchase price of $6,674 Weilos, a California-based
startup with an online social platform that provides a mobile health and weight loss community. Payment was in
the form of common stock issued ($2,810), restricted stock issued ($114) and cash ($2,775) plus cash in reserves
($975). The total purchase price of Weilos has been allocated to goodwill ($5,588), identifiable intangibles
($1,741) and other assets ($24) offset by deferred tax liabilities ($679). Restricted shares with a fair value at the
date of grant ($908) were issued to key employees, contingent upon 18 months post-combination employment,
and are accounted for as stock compensation cost in the post-combination financial statements. As a result of the
acquisition, Weilos became a wholly owned subsidiary of the Company and the Company began to consolidate
the entity as of the date of acquisition. The acquisition resulted in goodwill related to, among other things,
expected synergies in operations. The Company does not expect goodwill to be deductible for tax purposes.
Shutdown of China Operations
On December 12, 2013, the Company made a strategic decision to shut down its China operations. As a
result of this decision, the Company incurred a charge of $2,500 related to severance and the impairment of
property, plant and equipment and amortizable intangible assets.
5.
Franchise Rights Acquired, Goodwill and Other Intangible Assets
The Company performed its annual impairment review of goodwill and other indefinite-lived intangible
assets as of January 2, 2016 and January 3, 2015. As a result of this review, no impairment charges were
recorded for the fiscal years ended January 2, 2016 and January 3, 2015.
Franchise rights acquired are due to acquisitions of the Company’s franchised territories as well as the
acquisition of franchise promotion agreements and other factors associated with the acquired franchise territories.
For the fiscal year ended January 2, 2016, the change in the carrying value of indefinite-lived franchise rights
acquired is primarily due to the effect of exchange rate changes.
Goodwill primarily relates to the acquisition of the Company by H.J. Heinz Company in 1978, the
acquisition of WeightWatchers.com, Inc. in 2005, the acquisitions of the Company’s franchised territories, the
acquisitions of the majority interest in VPM and of Wello in fiscal 2014 and the acquisition of Weilos in fiscal
2015. See Note 4 for further information on certain acquisitions. For the fiscal year ended January 2, 2016, the
change in the carrying amount of goodwill is due to the Weilos acquisition and the effect of exchange rate
changes as follows:
Balance as of January 3, 2015 . . . . . . . . . . . . . . . . . . . . .
Goodwill acquired during the period . . . . . . . . . . . . . . . .
Effect of exchange rate changes . . . . . . . . . . . . . . . . . . . .
$134,611
5,588
(6,791)
$1,421
0
(51)
$7,661
0
(401)
$24,586
0
(7,293)
$168,279
5,588
(14,536)
Balance as of January 2, 2016 . . . . . . . . . . . . . . . . . . . . .
$133,408
$1,370
$7,260
$17,293
$159,331
North America
UK
CE
Other
Total
F-18
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The carrying values of finite-lived intangible assets as of January 2, 2016 and January 3, 2015 were as
follows:
Capitalized software costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Website development costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 2, 2016
January 3, 2015
Gross
Carrying
Amount
$119,658
100,105
10,960
7,976
Accumulated
Amortization
86,134
68,673
10,435
7,118
Gross
Carrying
Amount
$107,581
95,717
10,836
7,014
Accumulated
Amortization
$ 72,590
63,405
10,213
6,825
Trademarks and other intangible assets . . . . . . . . . . . . . .
$238,699
$172,360
$221,148
$153,033
Franchise rights acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total finite-lived intangible assets . . . . . . . . . . . . . . . . . .
4,182
$242,881
4,059
$176,419
4,735
$225,883
3,690
$156,723
Aggregate amortization expense for finite-lived intangible assets was recorded in the amounts of $34,719,
$29,372, and $27,567, for the fiscal years ended January 2, 2016, January 3, 2015 and December 28, 2013,
respectively. The franchise rights acquired related to the VPM acquisition are being amortized ratably over a 2
year period.
Estimated amortization expense of existing finite-lived intangible assets for the next five fiscal years and
thereafter is as follows:
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$32,094
$24,726
$ 8,451
$ 1,125
66
$
6.
Property and Equipment
The components of property and equipment were:
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 122,789
79,115
$ 124,788
79,496
January 2,
2016
January 3,
2015
Less: Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
201,904
(143,718)
204,284
(129,634)
$ 58,186
$ 74,650
Depreciation and amortization expense of property and equipment for the fiscal years ended January 2,
2016, January 3, 2015 and December 28, 2013 was $18,452, $20,635, and $20,342, respectively.
F-19
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. Long-Term Debt
The components of the Company’s long-term debt were as follows:
January 2, 2016
January 3, 2015
Balance
Effective
Rate
Balance
Effective
Rate
Revolving Facility due April 2, 2018 . . . . . . . . . . . . . . . . . . . . . . .
Tranche B-1 Term Facility due April 2, 2016 . . . . . . . . . . . . . . . .
Tranche B-2 Term Facility due April 2, 2020 . . . . . . . . . . . . . . . .
$
48,000
144,323
2,042,250
0
2.75% $
3.19%
294,750
4.00% 2,063,250
Total Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less Current Portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,234,573
213,323
3.98% 2,358,000
80,728
0.00%
3.12%
3.96%
3.86%
Total Long-Term Debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,021,250
$2,277,272
The Company’s credit facilities at the end of the first quarter of fiscal 2013 consisted of the following term
loan facilities and revolving credit facilities: a tranche B loan (“Term B Loan”), a tranche C loan (“Term C
Loan”), a tranche D loan (“Term D Loan”), a tranche E loan (“Term E Loan”), a tranche F loan (“Term F Loan”),
revolving credit facility A-1 (“Revolver A-1” ) and revolving credit facility A-2 (“Revolver A-2”).
On April 2, 2013, the Company refinanced its credit facilities pursuant to a new Credit Agreement (as
amended, supplemented or otherwise modified, the “Credit Agreement”) among the Company, the lenders party
thereto, JPMorgan Chase Bank, N.A., as administrative agent and an issuing bank, The Bank of Nova Scotia, as
revolving agent, swingline lender and an issuing bank, and the other parties thereto. The Credit Agreement
provides for (a) a revolving credit facility (including swing line loans and letters of credit) in an initial aggregate
principal amount of $250,000 that will mature on April 2, 2018 (the “Revolving Facility”), (b) an initial term B-1
loan credit facility in an aggregate principal amount of $300,000 that will mature on April 2, 2016 (the “Tranche
B-1 Term Facility”) and (c) an initial term B-2 loan credit facility in an aggregate principal amount of $2,100,000
that will mature on April 2, 2020 (the “Tranche B-2 Term Facility”, and together with the Tranche B-1 Term
Facility, the “Term Facilities”; the Term Facilities and Revolving Facility collectively, the “WWI Credit
Facility”). In connection with this refinancing, the Company used the proceeds from borrowings under the Term
Facilities to pay off a total of $2,399,904 of outstanding loans, consisting of $128,759 of Term B Loans,
$110,602 of Term C Loans, $117,612 of Term D Loans, $1,125,044 of Term E Loans, $817,887 of Term F
Loans, $21,247 of loans under the Revolver A-1 and $78,753 of loans under the Revolver A-2. Following the
refinancing of a total of $2,399,904 of loans, at April 2, 2013, the Company had $2,400,000 debt outstanding
under the Term Facilities and $248,848 of availability under the Revolving Facility. The Company incurred fees
of $44,817 during the second quarter of fiscal 2013 in connection with this refinancing. In the second quarter of
fiscal 2013, the Company wrote-off fees associated with this refinancing which resulted in the Company
recording a charge of $21,685 in early extinguishment of debt.
On September 26, 2014, the Company and certain lenders entered into an agreement amending the Credit
Agreement that, among other things, eliminated the Financial Covenant (as defined in the Credit Agreement)
with respect to the Revolving Facility. In connection with this amendment, the Company wrote-off deferred
financing fees of approximately $1,583 in the third quarter of fiscal 2014. Concurrently with and in order to
effect this amendment, the Company reduced the amount of the Revolving Facility from $250,000 to $50,000.
Under the terms of the Credit Agreement, depending on the Company’s Consolidated Leverage Ratio (as
defined in the Credit Agreement), the Company is obligated to offer to prepay the Term Facilities in an aggregate
amount determined by its excess cash flow (as defined in the Credit Agreement). On March 13, 2015, the
F-20
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Company commenced an offer to prepay at a discount to par up to $75,000 in aggregate principal amount of term
loans outstanding under the Tranche B-1 Term Facility. On March 20, 2015, the Company accepted offers with a
discount equal to or greater than 9.00% in respect of such term loans. On March 25, 2015, the Company paid an
aggregate amount of cash proceeds totaling $57,389 plus an amount sufficient to pay accrued and unpaid interest
on the amount prepaid to prepay $63,065 in aggregate principal amount of such term loans under the
Tranche B-1 Term Facility. This expenditure reduced, on a dollar for dollar basis, the Company’s
$59,728 obligation to make a mandatory excess cash flow prepayment offer to the term loan lenders under the
terms of the Credit Agreement. In addition, the Company made a voluntary prepayment at par on March 25, 2015
of $2,500 in respect of such term loans under the Tranche B-1 Term Facility to reduce the remaining excess cash
flow prepayment obligation for fiscal 2014. As a result of this prepayment, the Company wrote-off fees of
$326, incurred fees of $601 and recorded a gain on early extinguishment of debt of $4,749, inclusive of these
fees, in the first quarter of fiscal 2015.
On June 17, 2015, the Company commenced another offer to prepay at a discount to par up to $229,000 in
aggregate principal amount of term loans outstanding under the Tranche B-1 Term Facility. On June 22, 2015,
the Company accepted offers with a discount equal to or greater than 9.00% in respect of such term loans. On
June 26, 2015, the Company paid an aggregate amount of cash proceeds totaling $77,225 plus an amount
sufficient to pay accrued and unpaid interest on the amount prepaid to prepay $84,862 in aggregate principal
amount of such term loans under the Tranche B-1 Term Facility. As a result of this prepayment, the Company
wrote-off fees of $321, incurred fees of $641 and recorded a gain on early extinguishment of debt of $6,677,
inclusive of these fees, in the second quarter of fiscal 2015.
On July 14, 2015, the Company drew down the $48,000 available on its Revolving Facility in order to
enhance its cash position and to provide additional financial flexibility. The revolver borrowing has been
classified as a short-term liability in consideration of the fact that the terms of the Revolving Facility require an
assessment as to whether there have been any material adverse changes with respect to the Company in
connection with the Company’s monthly interest elections. Although the revolver borrowing has been classified
as a short-term liability, absent any change in fact and circumstance, the Company has the ability to extend and
not repay the Revolving Facility until its due date of April 2, 2018. At January 2, 2016, under the WWI Credit
Facility, the Company had $2,186,573 outstanding consisting entirely of term loans, and borrowings of $48,000
outstanding under the Revolving Facility. In addition, at January 2, 2016, the Revolving Facility had $1,819 in
issued but undrawn letters of credit outstanding thereunder and $181 in available unused commitments
thereunder. The proceeds from borrowings under the Revolving Facility (including swing line loans and letters of
credit) are available to be used for working capital and general corporate purposes.
Borrowings under the Credit Agreement bear interest at a rate equal to, at the Company’s option, LIBOR
plus an applicable margin or a base rate plus an applicable margin. LIBOR under the Tranche B-2 Term Facility
is subject to a minimum interest rate of 0.75% and the base rate under the Tranche B-2 Term Facility is subject to
a minimum interest rate of 1.75%. Under the terms of the Credit Agreement, in the event the Company receives a
corporate rating of BB- (or lower) from S&P and a corporate rating of Ba3 (or lower) from Moody’s, the
applicable margin relating to both of the Term Facilities would increase by 25 basis points. On February 21,
2014, both S&P and Moody’s issued revised corporate ratings of the Company of B+ and B1, respectively. As a
result, effective February 21, 2014, the applicable margin on borrowings under the Tranche B-1 Term Facility
went from 2.75% to 3.00% and on borrowings under the Tranche B-2 Term Facility went from 3.00% to 3.25%.
The applicable margin relating to the Revolving Facility will fluctuate depending upon the Company’s
Consolidated Leverage Ratio. At January 2, 2016, borrowings under the Tranche B-1 Term Facility bore interest
at LIBOR plus an applicable margin of 3.00% and borrowings under the Tranche B-2 Term Facility bore interest
at LIBOR plus an applicable margin of 3.25%. Based on the Company’s Consolidated Leverage Ratio as of
F-21
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
January 2, 2016, borrowings under the Revolving Facility bore interest at LIBOR plus an applicable margin of
2.50%. On a quarterly basis, the Company will pay a commitment fee to the lenders under the Revolving Facility
in respect of unutilized commitments thereunder, which commitment fee will fluctuate depending upon the
Company’s Consolidated Leverage Ratio. Based on the Company’s Consolidated Leverage Ratio as of January 2,
2016, the commitment fee was 0.50% per annum. For the fiscal year ended January 2, 2016, the Company paid
$186 in commitment fees. The Company also will pay customary letter of credit fees and fronting fees under the
Revolving Facility, which totaled $48 for the fiscal year ended January 2, 2016.
The Credit Agreement contains customary covenants including covenants that, in certain circumstances,
restrict the Company’s ability to incur additional indebtedness, pay dividends on and redeem capital stock, make
other payments, including investments, sell its assets and enter into consolidations, mergers and transfers of all or
substantially all of its assets. The WWI Credit Facility does not require the Company to meet any financial
maintenance covenants and is guaranteed by certain of the Company’s existing and future subsidiaries.
Substantially all of the Company’s assets secure the WWI Credit Facility.
At January 2, 2016 and January 3, 2015, the Company’s debt consisted entirely of variable-rate instruments.
Interest rate swaps were entered into to hedge a portion of the cash flow exposure associated with the Company’s
variable-rate borrowings. The weighted average interest rate on the Company’s debt, exclusive of the impact of
swaps, was approximately 3.93% and 3.90% per annum based on interest rates at January 2, 2016 and January 3,
2015, respectively. The weighted average interest rate on the Company’s debt, including the impact of swaps,
was approximately 5.03% and 4.93% per annum based on interest rates at January 2, 2016 and January 3, 2015,
respectively.
Maturities
At January 2, 2016, the aggregate amounts of the Company’s existing long-term debt maturing in each of
the next five fiscal years were as follows:
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 213,323
21,000
21,000
21,000
1,958,250
$2,234,573
8. Treasury Stock
On October 9, 2003, the Company’s Board of Directors authorized and the Company announced a program
to repurchase up to $250,000 of the Company’s outstanding common stock. On each of June 13, 2005, May 25,
2006 and October 21, 2010, the Company’s Board of Directors authorized and the Company announced adding
$250,000 to the program. The repurchase program allows for shares to be purchased from time to time in the
open market or through privately negotiated transactions. No shares will be purchased from Artal Holdings,
Sp. z o.o., Succursale de Luxembourg and its parents and subsidiaries under the program. The repurchase
program currently has no expiration date.
During the fiscal years ended January 2, 2016, January 3, 2015 and December 28, 2013, the Company
purchased no shares of its common stock in the open market under the repurchase program. As of the end of
fiscal 2015, $208,933 remained available to purchase shares of our common stock under the repurchase program.
F-22
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. Earnings Per Share
Basic earnings per share (“EPS”) are calculated utilizing the weighted average number of common shares
outstanding during the periods presented. Diluted EPS is calculated utilizing the weighted average number of common
shares outstanding during the periods presented adjusted for the effect of dilutive common stock equivalents.
The following table sets forth the computation of basic and diluted EPS for the fiscal years ended:
January 2,
2016
January 3,
2015
December 28,
2013
Numerator:
Net income attributable to Weight Watchers International, Inc.
. . . . . .
$32,945
$117,787
$202,742
Denominator:
Weighted average shares of common stock outstanding . . . . . . . . . . . .
Effect of dilutive common stock equivalents . . . . . . . . . . . . . . . . . . . . .
Weighted average diluted common shares outstanding . . . . . . . . . . . . .
58,369
597
58,966
56,607
98
56,705
56,144
250
56,394
Earnings Per Share attributable to Weight Watchers International, Inc.
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
0.56
0.56
$
$
2.08
2.08
$
$
3.61
3.60
The number of anti-dilutive common stock equivalents excluded from the calculation of the weighted
average number of common shares for diluted EPS was 1,699, 3,073, and 1,285 for the years ended January 2,
2016, January 3, 2015 and December 28, 2013, respectively.
10. Stock Plans
Incentive Compensation Plans and Winfrey Option
On May 6, 2008 and May 12, 2004, respectively, the Company’s shareholders approved the 2008 Stock
Incentive Plan (the “2008 Plan”) and the 2004 Stock Incentive Plan (the “2004 Plan”). On May 6, 2014, the
Company’s shareholders approved the 2014 Stock Incentive Plan (as amended, the “2014 Plan” and together
with the 2004 Plan and the 2008 Plan, the “Stock Plans”), which replaced the 2008 Plan and 2004 Plan for all
equity-based awards granted on or after May 6, 2014. The 2014 Plan is 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 a multi-
year period directly with the interests of the shareholders of the Company. The Company’s Board of Directors or
a committee thereof administers the 2014 Plan.
Under the 2014 Plan, grants may take the following forms at the Compensation and Benefit Committee’s
discretion: non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock units
(“RSUs”), restricted stock and other share-based awards. As of its effective date, the maximum number of shares
of common stock available for grant under the 2014 Plan was 3,500, subject to increase and adjustment as set
forth in the 2014 Plan.
Under the 2014 Plan, the Company also grants fully-vested shares of its common stock to certain members
of its Board of Directors. While these shares are fully vested the directors are restricted from selling these shares
while they are still serving on the Company’s Board of Directors. During the fiscal years ended January 2,
2016, January 3, 2015 and December 28, 2013, the Company granted 50, 20, and 14, fully-vested shares,
respectively, and recognized compensation expense of $507, $497, and $524, respectively.
F-23
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
From time to time, the Company has granted fully-vested shares of its common stock to individuals in
connection with special circumstances. In fiscal 2015, the Company granted an aggregate of 105 fully-vested
shares of its common stock to individuals under such special circumstances.
Under the Winfrey Option Agreement, the Company granted Ms. Winfrey a fully vested non-qualified
option to purchase 3,513 shares of its common stock as more fully described in Note 3.
The Company issues common stock for share-based compensation awards from treasury stock. The total
compensation cost that has been charged against income for these plans and the Winfrey Option, as applicable,
was $24,771, $10,533, and $4,255 for the years ended January 2, 2016, January 3, 2015 and December 28, 2013,
respectively. Such amounts have been included as a component of selling, general and administrative expenses.
The total income tax benefit recognized in the income statement for all share-based compensation arrangements
was $8,170, $3,285, and $1,174 for the years ended January 2, 2016, January 3, 2015 and December 28, 2013,
respectively. The tax benefits realized from options exercised and RSUs vested totaled $274, $301, and $4,217
for the years ended January 2, 2016, January 3, 2015 and December 28, 2013, respectively. No compensation
costs were capitalized. As of January 2, 2016, there was $19,600 of total unrecognized compensation cost related
to stock options and RSUs granted under the Stock Plans. That cost is expected to be recognized over a
weighted-average period of approximately 1.5 years.
While the Stock Plans permit various types of awards, other than the aforementioned shares issued to
directors and certain individuals in connection with special circumstances, grants under the plans have historically
been either non-qualified stock options or RSUs. In fiscal 2015, 2014 and 2013, the Company also granted special
performance-based stock option awards. The following describes some further details of these awards.
Stock Option Awards Under Stock Plans
Option Awards with Time Vesting Criteria
Pursuant to the option components of the Stock Plans, the Company’s Board of Directors authorized the
Company to enter into agreements under which certain employees received stock options with time vesting
criteria (“Time Vesting Options”). The options are exercisable based on the terms outlined in the agreements.
Time Vesting Options outstanding at January 2, 2016 and January 3, 2015 vest over a period of three to five
years and the expiration term is ten years. Time Vesting Options outstanding at January 2, 2016 and January 3,
2015 have an exercise price between $3.97 and $63.59 per share.
The fair value of each of these option awards is estimated on the date of grant using the Black-Scholes
option pricing model with the weighted average assumptions noted in the following table. Expected volatility is
based on the historical volatility of the Company’s stock. Since the Company’s option exercise history is limited,
it has estimated the expected term of these option grants to be the midpoint between the vesting period and the
contractual term of each award. The risk free interest rate is based on the U.S. Treasury yield curve in effect on
the date of grant which most closely corresponds to the expected term of the Time Vesting Options. The dividend
yield is based on our historic average dividend yield. The Company did not grant any Time Vesting Options in
fiscal 2014.
January 2,
2016
January 3,
2015
December 28,
2013
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (years) . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-24
0.0%
41.0%
0.0%
0.0%
1.84% - 1.89% 0% - 0% 1.3% - 2.2%
0.0
0.8%
36.5%
6.0
6.5
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Option Awards with Time and Performance Vesting Criteria
Pursuant to the option components of the Stock Plans, the Company’s Board of Directors authorized the
Company to enter into agreements under which certain employees received stock options with both time and
performance vesting criteria (“T&P Vesting Options”). As of the end of fiscal 2015, there were no
outstanding T&P Vesting Options. The options were exercisable based on the terms outlined in the
agreements. During fiscal 2015, fiscal 2014 and fiscal 2013, the Company granted 37, 1,601 and 687 T&P
Vesting Options, respectively, to certain employees that would have vested based on the achievement of
both time and performance vesting criteria. The time-vesting criteria would have been 100% satisfied on the
third anniversary of the date of the grant and the performance criteria was contingent upon meeting or
exceeding certain stock price hurdles. With respect to the performance-vesting criteria, the stock options
would have fully vested in 20% increments upon the first date that the average closing stock price for the 20
consecutive preceding trading days was equal to or greater than specified stock price hurdles. The fair value
of the T&P Vesting Options was estimated on the date of grant and was based on the likelihood of the
Company achieving the performance conditions. The Company estimated the fair value using a Monte Carlo
simulation that used various assumptions that included expected volatility, a risk free rate and an expected
term.
Expected volatility was based on the historical volatility of the Company’s stock. The risk-free interest rate
was based on the U.S. Treasury yield curve in effect on the date of grant which most closely corresponds to the
performance measurement period. The expected term represents the period from the grant date to the end of the
five year performance period. Compensation expense on T&P Vesting Options is recognized ratably over the
three year required service period as this period is longer than the derived service period calculated by the Monte
Carlo simulation.
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (years)
0.0%
40.5%
1.6%
5.0
0.0%
37.8%
1.4% - 1.8%
5.0
0.0%
36.5%
2%
5.0
January 2,
2016
January 3,
2015
December 28,
2013
On May 7, 2015, the Company’s shareholders approved an amendment to the 2014 Plan to permit a
one-time stock option exchange program under which the Company would offer eligible employees the
opportunity to exchange certain eligible T&P Vesting Options on a (a) two-for-one basis for new stock
options for all eligible employees, other than the Company’s Chief Executive Officer (i.e., so that the new
stock options would cover half as many shares as the corresponding surrendered options) and (b) 3.5-for-one
basis for new stock options for the Company’s Chief Executive Officer (i.e., so that the new stock options
would cover a number of shares equal to the quotient of the number of shares covered by the corresponding
surrendered options divided by 3.5). The option exchange program was designed to create better incentives
for employees to remain with the Company and contribute to the attainment of its business and financial
objectives.
On May 22, 2015, the Company launched a tender offer in connection with the option exchange program
which expired on June 22, 2015. Pursuant to the offer, employees tendered options to purchase 1,700 shares of
common stock (representing 99.6% of the total shares of common stock underlying the options eligible for
exchange) with a weighted-average exercise price of $24.68 per share. The Company cancelled and replaced
those options on June 22, 2015 with options to purchase 734 shares of common stock with an exercise price of
$5.25 per share, which was the closing price per share of the Company’s common stock on the New York Stock
F-25
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Exchange on June 22, 2015. The replacement options vest over three years, with 25% vesting on each of the first
and second anniversaries of the date of grant and 50% vesting on the third anniversary of the date of grant. The
option exchange resulted in an incremental stock option expense of $1,599, which was determined by comparing
the fair value of the T&P Vesting Option as calculated based on a Monte Carlo simulation, to the fair value of the
replacement options, as calculated using the Black-Scholes option pricing model, for the eligible options at the
time of exchange. This incremental expense, along with the unamortized expense associated with the cancelled
options, is being recognized ratably over the new vesting period of the replacement options, which is three years.
Option Activity
A summary of all option activity under the Stock Plans and the Winfrey Option (see Note 3 for additional
disclosure regarding the Winfrey Option) for the year ended January 2, 2016 is presented below:
Outstanding at January 3, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchanged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
3,250
4,572
(4)
(1,700)
(788)
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life (Yrs.)
Aggregate
Intrinsic
Value
$30.72
6.61
22.67
24.68
31.94
Outstanding at January 2, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,330
$11.79
Exercisable at January 2, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,916
$10.62
9.2
9.3
$73,260
$55,772
The weighted-average grant-date fair value of all options granted (including the Winfrey Option as
described in Note 3) was $4.86, $6.51, and $11.37 for the years ended January 2, 2016, January 3, 2015 and
December 28, 2013, respectively. The total intrinsic value of Time Vesting Options exercised was $17, $62, and
$9,858 for the years ended January 2, 2016, January 3, 2015 and December 28, 2013, respectively.
Cash received from Time Vesting Options exercised during the years ended January 2, 2016, January 3,
2015 and December 28, 2013 was $95, $658, and $16,187, respectively.
Restricted Stock Units Under Stock Plans
Pursuant to the restricted stock components of the Stock Plans, the Company’s Board of Directors
authorized the Company to enter into agreements under which certain employees received RSUs. The RSUs
are exercisable based on the terms outlined in the agreements. The RSUs vest over a period of three to five
years.
F-26
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The fair value of RSUs is determined using the closing market price of the Company’s common stock on the date
of grant. A summary of RSU activity under the Stock Plans for the year ended January 2, 2016 is presented
below:
Outstanding at January 3, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
838
780
(35)
(217)
Outstanding at January 2, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,366
Weighted-Average
Grant-Date
Fair Value
$27.71
$ 5.55
$51.18
$26.25
$27.71
The weighted-average grant-date fair value of RSUs granted was $5.55, $24.37, and $38.40 for the years
ended January 2, 2016, January 3, 2015 and December 28, 2013, respectively. The total fair value of RSUs
vested during the years ended January 2, 2016, January 3, 2015 and December 28, 2013 was $1,804, $3,042, and
$1,705, respectively.
11. Income Taxes
The following tables summarize the Company’s consolidated provision for US federal, state and foreign
taxes on income:
Current:
January 2,
2016
January 3,
2015
December 28,
2013
US federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (6,862)
1,859
15,740
$12,904
(131)
24,059
$ 60,030
9,583
25,647
$10,737
$36,832
$ 95,260
Deferred:
US federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,756
1,890
(548)
$25,162
2,876
1,061
$ 30,513
3,487
358
$12,098
$29,099
$ 34,358
Total tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$22,835
$65,931
$129,618
The components of the Company’s consolidated income before income taxes consist of the following:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,299
49,315
$ 88,024
95,640
$248,637
83,723
$55,614
$183,664
$332,360
January 2,
2016
January 3,
2015
December 28,
2013
F-27
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The difference between the US federal statutory tax rate and the Company’s consolidated effective tax rate
is as follows:
January 2,
2016
January 3,
2015
December 28,
2013
US federal statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
States income taxes (net of federal benefit)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves for uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease) increase in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on closure of China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35.0%
3.8
3.5
(0.4)
(2.2)
0.0
1.4
41.1%
35.0%
1.3
0.4
(0.6)
1.7
(2.1)
0.2
35.9%
35.0%
2.7
(0.1)
0.4
0.9
0.0
0.1
39.0%
The deferred tax assets and liabilities recorded on the Company’s consolidated balance sheets are as
follows:
Provision for estimated expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 2,
2016
January 3,
2015
$
4,638
4,164
34,285
641
14,330
8,024
24,778
(28,279)
$
7,863
0
37,746
9,567
6,653
6,922
13,060
(34,640)
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 62,581
$ 47,171
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
0
(1,823)
(210,901)
$
(6,482)
(3,123)
(188,745)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(212,724)
$(198,350)
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(150,143)
$(151,179)
Certain foreign operations of the Company have generated net operating loss carryforwards. If it has been
determined that it is more-likely-than-not that the deferred tax assets associated with these net operating loss
carryforwards will not be utilized, a valuation allowance has been recorded. As of January 2, 2016 and January 3,
2015, various foreign subsidiaries had net operating loss carryforwards of approximately $138,562 and $142,433,
respectively, most of which can be carried forward indefinitely.
The Company’s undistributed earnings of substantially all of its foreign subsidiaries are not considered to be
permanently reinvested. Accordingly, the Company has recorded all taxes, after taking into account foreign tax
credits, on the undistributed earnings of these foreign subsidiaries.
The undistributed earnings of the remaining foreign subsidiaries are indefinitely invested outside the United
States. We have not recorded a deferred tax liability of approximately $10,000 for the U.S. income taxes on the
undistributed earnings of these foreign subsidiaries.
F-28
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . .
Additions based on tax positions related to the current year
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . .
$6,268
2,106
(676)
$5,784
1,304
(820)
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,698
$6,268
$5,319
1,428
(963)
$5,784
January 2,
2016
January 3,
2015
December 28,
2013
At January 2, 2016, the total amount of unrecognized tax benefits that, if recognized, would affect our
effective tax rate is $6,948. As of January 2, 2016, given the nature of the Company’s uncertain tax positions, it
is reasonably possible that there will not be a significant change in the Company’s uncertain tax benefits within
the next twelve months.
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense.
The Company had $1,229 and $2,300 of accrued interest and penalties at January 2, 2016 and January 3, 2015,
respectively. The Company recognized $(266), $83, and $(1,188) in interest and penalties during the fiscal years
ended January 2, 2016, January 3, 2015 and December 28, 2013, respectively.
The Company or one of its subsidiaries files income tax returns in the US federal jurisdiction, and various
state and foreign jurisdictions. At January 2, 2016, with few exceptions, the Company was no longer subject to
US federal, state or local income tax examinations by tax authorities for years prior to 2012, or non-US income
tax examinations by tax authorities for years prior to 2009.
12. Employee Benefit Plans
The Company sponsors the Third Amended and Restated Weight Watchers Savings Plan (the “Savings
Plan”) for salaried and certain hourly US employees of the Company. The Savings Plan is a defined contribution
plan that provides for employer matching contributions of 100% of the employee’s tax deferred contributions up
to 3% of an employee’s eligible compensation for the fiscal years ended January 2, 2016, January 3, 2015 and
December 28, 2013. Expense related to these contributions for the fiscal years ended January 2, 2016, January 3,
2015 and December 28, 2013 was $2,454, $2,525, and $2,888, respectively.
During fiscal 2014, the Company received a favorable determination letter from the IRS that qualifies the
Savings Plan under Section 401(a) of the Internal Revenue Code.
Pursuant to the Savings Plan, the Company also makes profit sharing contributions for all full-time salaried
US employees who are eligible to participate in the Savings Plan (except for certain management personnel). The
profit sharing contribution is a guaranteed monthly employer contribution on behalf of each participant based on
the participant’s age and a percentage of the participant’s eligible compensation. The Savings Plan also has a
discretionary supplemental profit sharing employer contribution component that is determined annually by the
Compensation and Benefits Committee of the Company’s Board of Directors. Expense related to these
contributions for the fiscal years ended January 2, 2016, January 3, 2015 and December 28, 2013 was
$733, $266, and $1,658, respectively.
For certain US management personnel, the Company sponsors the Second Amended and Restated Weight
Watchers Executive Profit Sharing Plan (“EPSP”). Under the IRS definition, the EPSP is considered a
Nonqualified Deferred Compensation Plan. There is a promise of payment by the Company made on the
F-29
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
employees’ behalf instead of an individual account with a cash balance. The EPSP provides for a guaranteed
employer contribution on behalf of each participant based on the participant’s age and a percentage of the
participant’s eligible compensation. The EPSP has a discretionary supplemental employer contribution
component that is determined annually by the Compensation 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
January 2, 2016, January 3, 2015 and December 28, 2013 was $1,950, $1,090, and $2,651, respectively.
13. Cash Flow Information
Net cash paid during the year for:
January 2,
2016
January 3,
2015
December 28,
2013
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$117,602
$ 25,566
$123,100
$ 35,232
$99,687
$87,071
Noncash investing and financing activities were as follows:
Fair value of net assets/(liabilities) acquired in connection with
acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,439
$
359
$ (175)
Change in Capital expenditures and Capitalized software included in
accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . .
$ (1,969) $
3,347
$ (5,432)
Dividends declared but not yet paid at year-end . . . . . . . . . . . . . . . . . .
$
0
$
0
$
177
14. Commitments and Contingencies
In re Weight Watchers International, Inc. Securities Litigation
In March 2014, two substantially identical putative class action complaints alleging violation of the federal
securities laws were filed by individual shareholders against the Company, certain of the Company’s current and
former officers and directors, and Artal Group S.A. (“Artal”) in the United States District Court for the Southern
District of New York. The complaints were purportedly filed on behalf of all purchasers of the Company’s
common stock, no par value per share, between February 14, 2012 and October 30, 2013, inclusive (the “Class
Period”). The complaints allege that, during the Class Period, the defendants disseminated materially false and
misleading statements and/or concealed material adverse facts. The complaints allege claims under Sections
10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder. The plaintiffs
seek to recover unspecified damages on behalf of the class members. In June 2014, the Court consolidated the
cases and appointed lead plaintiffs and lead counsel. On August 12, 2014, the plaintiffs filed an amended
complaint that, among other things, reduced the Class Period to between February 14, 2012 and February 13,
2013 and dropped all current officers and certain directors previously named as defendants. On October 14, 2014,
the defendants filed a motion to dismiss. The plaintiffs filed an opposition to the defendants’ motion to dismiss
on November 24, 2014 and the defendants filed a reply in support of their motion to dismiss on December 23,
2014. The Company continues to believe that the suits are without merit and intends to defend them vigorously.
Tracey Mead, Derivatively on Behalf of Weight Watchers International, Inc. vs. Artal Group et. al. and Weight
Watchers International, Inc.
On May 29, 2014 and June 23, 2014, the Company received shareholder litigation demand letters alleging
breaches of fiduciary duties and unjust enrichment by Company officers and directors and Artal, to the alleged
F-30
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
injury of the Company. The allegations in the letters relate to those contained in the ongoing federal securities
litigation described above. In response to the letters, pursuant to Virginia law, the Board of Directors has created
a special committee to review and evaluate the facts and circumstances surrounding the claims made in the
demand letters. The special committee has decided to undertake its review after receiving a decision on
defendants’ motion to dismiss in the federal securities litigation given the overlapping issues.
On August 11, 2015, a purported shareholder derivative lawsuit was filed in New York State Court in
Westchester County. The complaint alleges that certain Company directors and executive officers breached their
various fiduciary duties by knowingly causing the Company to repurchase shares from Artal and from certain
executive officers at artificially inflated prices in connection with a tender offer made to all shareholders. The
complaint seeks an order for the defendants to disgorge all profits made from selling Company stock between
March 16, 2012 and April 9, 2012, as well as an award for damages sustained by the alleged breaches of
fiduciary duty. The parties sought to stay this suit pending a decision on defendants’ motion to dismiss in the
federal securities litigation asserting similar allegations. The Court denied the stay, but at the preliminary court
conference on December 17, 2015, the Court granted an adjournment and scheduled the next court conference for
April 29, 2016. The Company believes that the suit is without merit and intends to defend it vigorously.
Raymond Roberts v. Weight Watchers International, Inc.
On January 7, 2016, an OnlinePlus member filed a putative class action complaint against the Company in the
Supreme Court of New York, New York County, asserting class claims for breach of contract and violations of the
New York General Business Law. On February 5, 2016, the Company removed the case to the United States
District Court, Sothern District of New York. Specifically, the plaintiff is asserting that, as a result of the temporary
glitches in the Company’s website and app in November and December 2015, the Company has: (1) breached its
Subscription Agreement with its OnlinePlus members; and (2) engaged in misleading advertising and deceptive acts
and practices in violation of Sections 349 and 350 of the New York General Business Law. The plaintiff is seeking
unspecified actual, punitive and statutory damages, as well as his attorneys’ fees and costs incurred in connection
with this action. The Company believes that the suit is without merit and intends to defend it vigorously.
Other Litigation Matters
Due to the nature of the Company’s activities, it is also, at times, subject to pending and threatened legal
actions that arise out of the ordinary course of business. In the opinion of management, the disposition of any
such matters is not expected to have a material effect on the Company’s results of operations, financial condition
or cash flows.
Commitments
Minimum commitments under non-cancelable obligations, primarily for office and rental facilities operating
leases at January 2, 2016, consist of the following:
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 46,086
30,650
20,214
15,098
12,093
95,437
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$219,578
F-31
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Total rent expense charged to operations under these operating leases for the fiscal years ended January 2,
2016, January 3, 2015 and December 28, 2013 was $42,133, $44,228, and $46,300, respectively.
15. Segment and Geographic Data
The Company has four reportable segments based on an integrated geographical structure as follows: North
America, United Kingdom, Continental Europe (CE) and Other. Other consists of Asia Pacific and emerging
markets operations and franchise revenues and related costs, all of which have been grouped together as if they
were a single reportable segment because they do not meet any of the quantitative thresholds and are immaterial
for separate disclosure. To be consistent with the information that is presented to the chief operating decision
maker, the Company does not include intercompany activity in the segment results.
Total Revenue for the Year Ended
January 2,
2016
January 3,
2015
December 28,
2013
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Continental Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 755,396
124,773
229,147
55,103
$ 947,716
156,843
298,878
76,479
$1,163,002
172,783
299,403
88,935
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,164,419
$1,479,916
$1,724,123
Segment operating income:
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Continental Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total segment operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General corporate expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on Brazil acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interest . . . . . . . . . . . . . . . . . . . . .
Net Income for the Year Ended
January 2,
2016
January 3,
2015
December 28,
2013
$140,579
24,310
62,364
8,007
$250,282
29,187
79,282
13,676
$403,104
34,429
66,273
13,774
235,260
(67,202)
121,843
2,027
0
(11,426)
22,835
32,779
166
372,427
(73,113)
122,984
3,206
(10,540)
0
65,931
117,733
54
517,580
(59,828)
103,108
599
0
21,685
129,618
202,742
—
Net income attributable to Weight Watchers International, Inc.
. . . . . . . . . .
$ 32,945
$117,787
$202,742
F-32
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Depreciation and Amortization for the Year Ended
January 2,
2016
January 3,
2015
December 28,
2013
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Continental Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total segment depreciation and amortization . . . . . . . . . . . . . . . . . .
General corporate depreciation and amortization . . . . . . . . . . . . . . .
$47,128
766
1,861
1,473
51,228
8,829
$34,654
1,158
2,356
2,144
40,312
18,227
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$60,057
$58,539
$35,928
1,269
2,222
1,965
41,384
14,197
$55,581
The following tables present information about the Company’s sources of revenue and other information by
geographic area. There were no material amounts of sales or transfers among geographic areas and no material
amounts of US export sales.
Meeting Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Online Subscription Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-meeting product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Licensing, franchise royalties and other . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 587,801
349,567
127,291
99,760
$ 744,560
437,385
169,101
128,870
$ 851,626
509,135
211,963
151,399
Revenues for the Year Ended
January 2,
2016
January 3,
2015
December 28,
2013
$1,164,419
$1,479,916
$1,724,123
Revenues for the Year Ended
January 2,
2016
January 3,
2015
December 28,
2013
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Continental Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 700,972
54,277
124,773
229,147
55,250
$ 869,541
78,175
156,843
298,878
76,479
$1,067,200
95,802
172,783
299,403
88,935
$1,164,419
$1,479,916
$1,724,123
Long-Lived Assets
January 2,
2016
January 3,
2015
December 28,
2013
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Continental Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$51,103
2,757
2,938
614
774
$67,903
3,149
724
1,454
1,420
$79,448
3,070
1,192
2,083
1,259
$58,186
$74,650
$87,052
F-33
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
16. Fair Value Measurements
Accounting guidance on fair value measurements for certain financial assets and liabilities requires that
assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:
• Level 1—Quoted prices in active markets for identical assets or liabilities.
• Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities.
• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant
to the fair value of the assets or liabilities.
When measuring fair value, the Company is required to maximize the use of observable inputs and
minimize the use of unobservable inputs.
Fair Value of Financial Instruments
The Company’s significant financial instruments include long-term debt and interest rate swap agreements.
The fair value of the Company’s borrowings under the Revolving Facility approximates a carrying value of
$48,000 due to the nature of the debt.
The fair value of the Company’s Term Facilities is determined by utilizing average bid prices on or near the
end of each fiscal quarter (Level 2 input). As of January 2, 2016 and January 3, 2015, the fair value of the
Company’s long-term debt was approximately $1,682,778 and $1,888,051, respectively, as compared to carrying
value of $2,186,573 and $2,358,000, respectively.
Derivative Financial Instruments
The fair values for the Company’s derivative financial instruments are determined using observable current
market information such as the prevailing LIBOR interest rate and LIBOR yield curve rates and include
consideration of counterparty credit risk. See Note 17 for disclosures related to derivative financial instruments.
The following table presents the aggregate fair value of the Company’s derivative financial instruments:
Fair Value Measurements Using:
Total
Fair
Value
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Interest rate swap liability at January 2, 2016 . . . . . . . $44,170
Interest rate swap liability at January 3, 2015 . . . . . . . $42,423
$0
$0
$44,170
$42,423
$0
$0
The Company did not have any transfers into or out of Levels 1 and 2, and did not maintain any assets or
liabilities classified as Level 3, during the fiscal years ended January 2, 2016 and January 3, 2015.
17. Derivative Instruments and Hedging
As of January 2, 2016 and January 3, 2015, the Company had in effect an interest rate swap with a notional
amount totaling $1,500,000.
F-34
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
In January 2009, the Company entered into a forward-starting interest rate swap which had an effective date
of January 4, 2010 and a termination date of January 27, 2014. From December 29, 2012 through April 1, 2013,
this swap had qualified for hedge accounting, and therefore changes in the fair value of this derivative were
recorded in accumulated other comprehensive income (loss). Effective April 2, 2013, due to the Company’s debt
refinancing, the Company ceased the application of hedge accounting for this swap. Accordingly, changes in the
fair value of this swap were recorded in earnings subsequent to April 2, 2013 and were immaterial for the fiscal
year ended January 3, 2015.
On July 26, 2013, in order to hedge an additional portion of its variable rate debt, the Company entered into
a forward-starting interest rate swap with an effective date of March 31, 2014 and a termination date of April 2,
2020. The initial notional amount of this swap was $1,500,000. During the term of this swap, the notional amount
will decrease from $1,500,000 effective March 31, 2014 to $1,250,000 on April 3, 2017 with a further reduction
to $1,000,000 on April 1, 2019. This interest rate swap effectively fixes the variable interest rate on the notional
amount of this swap at 2.38%. This swap qualifies for hedge accounting and, therefore, changes in the fair value
of this swap have been recorded in accumulated other comprehensive income (loss).
As of January 2, 2016 and January 3, 2015, cumulative unrealized losses for qualifying hedges were
reported as a component of accumulated other comprehensive loss in the amounts of $23,135 ($38,053 before
taxes) and $21,856 ($35,830 before taxes), respectively.
The Company is hedging forecasted transactions for periods not exceeding the next six years. The Company
expects approximately $10,796 ($17,698 before taxes) of derivative losses included in accumulated other
comprehensive loss at January 2, 2016, based on current market rates, will be reclassified into earnings within the
next 12 months.
18. Accumulated Other Comprehensive Loss
With respect to the disclosure of the amounts reclassified from accumulated other comprehensive income
for the fiscal year ended January 3, 2015 the Company has revised the amounts previously disclosed to correct
those amounts by increasing the amount reclassified related to the Loss on Qualifying Hedges from $7,413 to
$19,815 and $4,522 to $12,087 on a pre- and after-tax basis, respectively.
F-35
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Amounts reclassified out of accumulated other comprehensive income (loss) are as follows:
Changes in Accumulated Other Comprehensive Income (Loss) by Component(a)
Fiscal Year Ended January 2, 2016
Loss on
Qualifying
Hedges
Foreign
Currency
Translation
Adjustments
Total
Beginning Balance at January 3, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(21,856)
1,906
$(19,950)
Other comprehensive loss before reclassifications, net of tax . . . . . . . . .
Amounts reclassified from accumulated other comprehensive loss, net
(16,371)
(16,973)
(33,344)
of tax(b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,092
0
15,092
Net current period other comprehensive loss including noncontrolling
interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,279)
(16,973)
(18,252)
Less: net current period other comprehensive loss attributable to the
noncontrolling interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0
937
937
Ending Balance at January 2, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(23,135)
$(14,130)
$(37,265)
(a) Amounts in parentheses indicate debits
(b) See separate table below for details about these reclassifications
Fiscal Year Ended January 3, 2015
Loss on
Qualifying
Hedges
Foreign
Currency
Translation
Adjustments
Total
Beginning Balance at December 28, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (4,603)
$ 13,120
$ 8,517
Other comprehensive loss before reclassifications, net of tax . . . . . . . . .
Amounts reclassified from accumulated other comprehensive income,
(29,340)
(11,692)
(41,032)
net of tax(b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,087
0
12,087
Net current period other comprehensive loss including noncontrolling
interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(17,253)
(11,692)
(28,945)
Less: net current period other comprehensive loss attributable to the
noncontrolling interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0
478
478
Ending Balance at January 3, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(21,856)
$ 1,906
$(19,950)
(a) Amounts in parentheses indicate debits
(b) See separate table below for details about these reclassifications
F-36
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Fiscal Year Ended December 28, 2013
Loss on
Qualifying
Hedges
Foreign
Currency
Translation
Adjustments
Total
Beginning Balance at December 29, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(6,602)
$19,461
$ 12,859
Other comprehensive loss before reclassifications, net of tax . . . . . . . . .
Amounts reclassified from accumulated other comprehensive income,
(4,124)
(6,341)
(10,465)
net of tax(b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,123
0
6,123
Net current period other comprehensive loss including noncontrolling
interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,999
(6,341)
(4,342)
Ending Balance at December 28, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(4,603)
$13,120
$ 8,517
(a) Amounts in parentheses indicate debits
(b) See separate table below for details about these reclassifications
Reclassifications out of Accumulated Other Comprehensive Income (Loss)(a)
Details about Other
Comprehensive Income
Components
Loss on Qualifying Hedges
Fiscal Year Ended
January 2,
2016
January 3,
2015
December 28,
2013
Amounts Reclassified from
Accumulated Other
Comprehensive Loss
Affected Line Item in the
Statement Where Net Income is Presented
Interest rate contracts . . . . . . . . .
$(24,741) $(19,815)
$(10,037)
Interest expense
(24,741)
9,649
(19,815)
7,728
(10,037)
3,914
Income before income taxes
Provision for income taxes
$(15,092) $(12,087)
$ (6,123) Net income
(a) Amounts in parentheses indicate debits to profit / loss
19. Restructuring Charges
As previously disclosed, the Company established a new cost-savings initiative and, as part of this cost-
savings initiative, in fiscal 2015, the Company undertook a plan of reduction in force which resulted in the
elimination of certain positions and termination of employment for certain employees worldwide. In fiscal 2014,
the Company reviewed its organization and undertook a restructuring which resulted in the elimination of certain
positions and the termination of employment for certain employees worldwide.
In connection with these plans, the Company recorded restructuring charges in connection with employee
termination benefit costs of $8,412 ($5,131 after tax) and $11,840 ($7,222 after tax) during the fiscal years ended
January 2, 2016 and January 3, 2015, respectively. For the fiscal years ended January 2, 2016 and January 3,
2015, these charges impacted cost of revenues by $1,505 and $4,642, respectively, and selling, general and
administrative expenses by $6,907 and $7,198, respectively. For the fiscal years ended January 2, 2016 and
January 3, 2015, all restructuring charges were recorded to general corporate expense and therefore there was no
impact to the segments.
F-37
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the fiscal year ended January 2, 2016, the reconciliation of the liability balance for these restructuring
charges was as follows:
Balance as of January 3, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,570
8,412
(9,173)
Balance as of January 2, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,809
The Company expects the $1,809 liability as of January 2, 2016 to be paid in fiscal 2016.
20. Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued updated guidance on accounting
for revenue from contracts with customers. The objective of this guidance is to provide a single, comprehensive
revenue recognition model, to remove existing industry specific guidance and to expand qualitative and
quantitative disclosures. The core principle of the new standard is for revenue recognition to depict transfer of
control to the customer in an amount that reflects consideration to which an entity expects to be entitled. This
guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal
years, with early adoption not permitted. The Company is currently evaluating the impact that the adoption of
this guidance will have on the consolidated financial position, results of operations or cash flows of the
Company.
In August 2014, the FASB issued updated guidance on the disclosure of uncertainties about an entity’s
ability to continue as a going concern. The update provides guidance about management’s responsibility to
evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide
related footnote disclosures. In doing so, the amendments should reduce diversity in the timing and content of
footnote disclosures. This guidance is effective for the annual period ending after December 15, 2016, and for
annual periods and interim periods thereafter, with early adoption permitted. The Company is currently
evaluating the impact that the adoption of this guidance will have on the Company.
In February 2015, the FASB issued amendments to the current consolidation guidance. The amendments
affect both the variable interest entity and voting interest entity consolidation models. The new guidance is
effective for the Company beginning January 1, 2016, with early adoption permitted. The adoption of this
guidance will not have a material effect on the Company.
In April 2015, the FASB issued updated guidance to simplify the presentation of debt issuance costs. The
amendments in this update require that debt issuance costs related to a recognized debt liability be presented in
the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt
discounts. In August 2015, the FASB issued updated guidance which clarifies the treatment of debt issuance
costs from line-of-credit arrangements. In particular, this guidance clarifies that the Securities and Exchange
Commission Staff would not object to an entity deferring and presenting debt issuance costs related to a line-of-
credit arrangement as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term
of such arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit
arrangement. This guidance is effective for fiscal years beginning after December 15, 2015 and interim periods
within those fiscal years, and should be applied on a retrospective basis with earlier adoption permitted for
financial statements that have not been previously issued. The Company does not expect the adoption to have a
material impact on the financial statements.
F-38
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
In July 2015, the FASB issued updated guidance to simplify the measurement of inventory. Under this
amendment, an entity using an inventory method other than last-in, first out or the retail inventory method should
measure inventory at the lower of cost and net realizable value. The new guidance clarifies that net realizable
value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of
completion, disposal, and transportation. This guidance is effective for fiscal years beginning after December 15,
2016, including interim periods within those fiscal years, and should be applied prospectively with earlier
adoption permitted as of the beginning of the interim or annual reporting period. The Company is currently
evaluating the impact that the adoption of this guidance will have on the consolidated financial position of the
Company.
In September 2015, the FASB issued updated guidance to simplify the accounting for adjustments made to
provisional amounts recognized in a business combination, eliminating the requirement to retrospectively
account for those adjustments. This guidance is effective for fiscal years beginning after December 15, 2015,
including interim periods within those fiscal years, and should be applied prospectively with earlier adoption
permitted as of the beginning of the interim or annual reporting period. There is no impact on the consolidated
financial position, results of operations or cash flows of the Company as a result of this guidance.
In November 2015, the FASB issued updated guidance that in a classified statement of financial position, an
entity shall classify deferred tax assets and liabilities as noncurrent amounts. This guidance is effective for fiscal
years beginning after December 15, 2016, including interim periods within those fiscal years and earlier adoption
is permitted. The Company does not expect the adoption to have a material impact on the financial statements.
21. Related Party
As more fully described in Note 3, on October 18, 2015, the Company entered into the Strategic
Collaboration Agreement with Ms. Winfrey, under which she will consult with the Company and participate in
developing, planning, executing and enhancing the Weight Watchers program and related initiatives, and provide
it with services in her discretion to promote the Company and its programs, products and services.
In addition to the Strategic Collaboration Agreement, Ms. Winfrey and her related entities provided services
to the Company totaling $647 for the fiscal year ended January 2, 2016, which services included advertising,
production and related fees.
The Company’s accounts payable to parties related to Ms. Winfrey at January 2, 2016 was $574.
22. Quarterly Financial Information (Unaudited)
The following is a summary of the unaudited quarterly consolidated results of operations for the fiscal years
ended January 2, 2016 and January 3, 2015.
For the Fiscal Quarters Ended
April 4,
2015
July 4,
2015
October 3,
2015
January 2,
2016
Fiscal year ended January 2, 2016
Revenues, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income attributable to the Company . . . . . . . . . . . . . .
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-39
$322,103
157,303
18,044
(5,433)
(0.10) $
(0.10) $
$309,754
159,364
70,580
27,877
0.49
0.49
$
$
$273,324
136,622
63,108
21,790
0.38
0.38
$
$
$259,238
120,798
16,326
(11,309)
(0.18)
(0.18)
$
$
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Fiscal Quarters Ended
March 29,
2014
June 28,
2014
September
27, 2014
January 3,
2015
Fiscal year ended January 3, 2015
Revenues, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to the Company . . . . . . . . . . . . . . . . . . .
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$409,358
222,900
51,053
21,531
0.38
0.38
$
$
$397,547
225,814
114,564
54,002
0.95
0.95
$
$
$345,184
187,567
91,394
37,892
0.67
0.67
$
$
$327,827
166,270
42,303
4,362
0.08
0.08
$
$
Basic and diluted EPS are computed independently for each of the periods presented. Accordingly, the sum
of the quarterly EPS amounts may not agree to the total for the year.
As discussed in further detail in Note 19, the Company recorded restructuring charges of $5,761
($3,514 after tax), $232 ($142 after tax), $1,081 ($660 after tax) and $1,338 ($815 after tax) during the first,
second, third and fourth quarters of fiscal 2015, respectively, in connection with employee termination benefit
costs associated with its previously disclosed cost-savings initiative plan to restructure its organization, reducing
gross profit, operating income, net income attributable to the Company and to EPS all four quarters of fiscal
2015. The Company recorded restructuring charges of $3,656 ($2,235 after tax), $6,498 ($3,964 after tax),
$713 ($430 after tax) and $973 ($593 after tax) during the first, second, third and fourth quarters of fiscal 2014,
respectively, in connection with employee termination benefit costs associated with its previously disclosed cost-
savings initiative plan to restructure its organization, reducing gross profit, operating income, net income
attributable to the Company and EPS all four quarters of fiscal 2014.
As discussed in further detail in Note 3, operating income, net income and EPS during the fourth quarter of
fiscal 2015 were impacted by the Company recording expenses of $13,593 ($8,292 after tax and $0.13 per fully
diluted share) in connection with the Winfrey Transaction in the fourth quarter of fiscal 2015.
As discussed in further detail in Note 7, net income and EPS were impacted by a gain on the early
extinguishment of debt of $4,749 ($2,897 after tax), and $6,727 ($4,103 after tax), or $0.05 and $0.07 per fully
diluted share, during the first and second quarters of fiscal 2015, respectively.
As discussed in Note 1, the Company identified and recorded out-of-period adjustments related to
immaterial errors in prior period financial statements that impacted net income attributable to the Company by
$420 and $410 for the second and fourth quarter of fiscal 2015, respectively.
As discussed in further detail in Note 4, in the first quarter of fiscal 2014, net income and EPS were
impacted by a gain of $10,540 ($6,396 after tax), or $0.11 per fully diluted share, recognized in connection with
the Brazil acquisition due to an adjustment of the Company’s previously held equity interest to fair value offset
by a charge associated with the settlement of the royalty-free arrangement of the Brazilian partnership.
In the second quarter of fiscal 2014, net income and EPS were impacted by a $2,350, or $0.04 per fully
diluted share, net tax benefit related to an intercompany loan write-off in connection with the closure of our
China business partially offset by the recognition of a valuation allowance related to tax benefits for foreign
losses that are not expected to be realized.
F-40
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
Additions
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Charged
to Other
Accounts Deductions(1)
Balance at
End
of Period
FISCAL YEAR ENDED JANUARY 2, 2016
Allowance for doubtful accounts . . . . . . . . . . . . .
Inventory and other reserves . . . . . . . . . . . . . . . . .
Tax valuation allowance . . . . . . . . . . . . . . . . . . . .
$ 3,287
$ 7,107
$34,640
0
$ (446) $
0
$
$ 7,593
$(2,631)
$ 1,056
$
(615)
$(10,635)
$ (4,785)
$ 2,226
$ 4,065
$28,280
FISCAL YEAR ENDED JANUARY 3, 2015
Allowance for doubtful accounts . . . . . . . . . . . . .
Inventory and other reserves . . . . . . . . . . . . . . . . .
Tax valuation allowance . . . . . . . . . . . . . . . . . . . .
$ 3,477
$ 5,859
$36,372
99
$
$11,822
$ 3,183
$
$
$
0
0
0
(289)
$
$(10,574)
$ (4,915)
$ 3,287
$ 7,107
$34,640
FISCAL YEAR ENDED DECEMBER 28, 2013
Allowance for doubtful accounts . . . . . . . . . . . . .
Inventory and other reserves . . . . . . . . . . . . . . . . .
Tax valuation allowance . . . . . . . . . . . . . . . . . . . .
$ 3,447
$ 6,942
$31,015
$
596
$ 9,580
$ 3,821
0
$
$
0
$ 2,429
$
(566)
$(10,663)
(893)
$
$ 3,477
$ 5,859
$36,372
(1) Primarily represents the utilization of established reserves, net of recoveries, where applicable.
S-1
Exhibit
Number
**3.1
**3.2
**3.3
**4.1
**10.1
**10.2
**10.3
†**10.4
†**10.5
†**10.6
**10.7
**10.8
EXHIBIT INDEX
Description
Amended and Restated Articles of Incorporation of Weight Watchers International, Inc. (filed as
Exhibit 3.1 to Amendment No. 1 to the Company’s Registration Statement on Form 8-A as filed on
January 6, 2012 (File No. 001-16769), and incorporated herein by reference).
Articles of Amendment to the Articles of Incorporation, as Amended and Restated, of Weight
Watchers International, Inc. to Create a New Series of Preferred Stock Designated as Series B
Junior Participating Preferred Stock, adopted as of November 14, 2001 (filed as Exhibit 3.2 to
Amendment No. 1 to the Company’s Registration Statement on Form 8-A, as filed on January 6,
2012 (File No. 001-16769), and incorporated herein by reference).
Amended and Restated Bylaws of Weight Watchers International, Inc., as of November 14, 2013
(filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed on November 18, 2013
(File No. 001-16769), and incorporated herein by reference).
Specimen of stock certificate representing Weight Watchers International, Inc.’s common stock, no
par value (filed as Exhibit 4.1 to Amendment No. 1 to the Company’s Registration Statement on
Form 8-A, as filed on January 6, 2012 (File No. 001-16769), and incorporated herein by reference).
License Agreement, dated as of September 29, 1999, between WW Foods, LLC and Weight
Watchers International, Inc. (filed as Exhibit 10.4 to the Company’s Registration Statement on
Form S-4, as filed on December 2, 1999 (File No. 333-92005), and incorporated herein by
reference).
LLC Agreement, dated as of September 29, 1999, between H.J. Heinz Company and Weight
Watchers International, Inc. (filed as Exhibit 10.7 to the Company’s Registration Statement on
Form S-4, as filed on December 2, 1999 (File No. 333-92005), and incorporated herein by
reference).
Operating Agreement, dated as of September 29, 1999, between Weight Watchers International, Inc.
and H.J. Heinz Company (filed as Exhibit 10.8 to the Company’s Registration Statement on
Form S-4, as filed on December 2, 1999 (File No. 333-92005), and incorporated herein by
reference).
Weight Watchers International, Inc. 2004 Stock Incentive Plan (filed as Appendix A of the Company’s
Definitive Proxy Statement on Schedule 14A filed on April 8, 2004 (File No. 001-16769), and
incorporated herein by reference).
Amendment to Weight Watchers International, Inc. 2004 Stock Incentive Plan (filed as Exhibit 10.5
to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 2, 2005, as filed
on August 11, 2005 (File No. 001-16769), and incorporated herein by reference).
Weight Watchers International, Inc. 2008 Stock Incentive Plan (filed as Appendix A of the Company’s
Definitive Proxy Statement on Schedule 14A filed on March 31, 2008 (File No. 001-16769), and
incorporated herein by reference).
Corporate Agreement, dated as of November 5, 2001, between Weight Watchers International, Inc.
and Artal Luxembourg S.A. (filed as Exhibit 10.36 to Amendment No. 2 to the Company’s
Registration Statement on Form S-1, as filed on November 9, 2001 (File No. 333-69362), and
incorporated herein by reference).
Amendment, dated as of July 1, 2005, to the Corporate Agreement, dated as of November 5, 2001,
by and between Weight Watchers International, Inc. and Artal Luxembourg S.A. (filed as
Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 2,
2005, as filed on August 11, 2005 (File No. 001-16769), and incorporated herein by reference).
Exhibit
Number
**10.9
†**10.10
†**10.11
**10.12
†**10.13
†**10.14
†**10.15
†**10.16
†**10.17
†**10.18
**10.19
**10.20
Description
Registration Rights Agreement, dated as of September 29, 1999, among Weight Watchers
International, Inc., H.J. Heinz Company and Artal Luxembourg S.A. (filed as Exhibit 10.38 to
Amendment No. 1 to the Company’s Registration Statement on Form S-1, as filed on October 29,
2001 (File No. 333-69362), and incorporated herein by reference).
Form of Amended and Restated Continuity Agreement, between Weight Watchers International,
Inc. and certain key executives (Chief Executive 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, as filed on August 11, 2011 (File No. 001-16769), and incorporated
herein by reference).
Form of Amended and Restated Continuity Agreement, between Weight Watchers International,
Inc. and certain key executives (certain executive officers) (filed as Exhibit 10.2 to the Company’s
Quarterly Report on Form 10-Q for the fiscal quarter ended July 2, 2011, as filed on August 11,
2011 (File No. 001-16769), and incorporated herein by reference).
Principal Stockholders Agreement among Weight Watchers International, Inc.,
WeightWatchers.com, Inc. and Artal Luxembourg S.A. dated as of June 13, 2005 (filed as
Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 2,
2005, as filed on August 11, 2005 (File No. 001-16769), and incorporated herein by reference).
Form of Term Sheet for Employee Stock Awards and Form of Terms and Conditions for Employee
Stock Awards (filed as Exhibit 10.34 to the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2005, as filed on February 27, 2006 (File No. 001-16769), and
incorporated herein by reference).
Form of Term Sheet for Employee Restricted Stock Unit Awards and Form of Terms and
Conditions for Employee Restricted Stock Unit Awards (filed as Exhibit 10.35 to the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2005, as filed on
February 27, 2006 (File No. 001-16769), and incorporated herein by reference).
Form of Amended and Restated Directors Restricted Stock Agreement for Weight Watchers
International, Inc. non-employee director restricted stock (filed as Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2014, as filed on August 7,
2014 (File No. 001-16769), and incorporated herein by reference).
Amended and Restated Weight Watchers International, Inc. 2014 Stock Incentive Plan (filed as
Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed on May 8, 2015
(File No. 001-16769), and incorporated herein by reference).
Summary of Non-Employee Director Compensation (filed as Exhibit 10 to the Company’s Current
Report on Form 8-K, as filed on July 18, 2006 (File No. 001-16769), and incorporated herein by
reference).
Statement of Amendments to the Weight Watchers International, Inc. 2004 Stock Incentive Plan
(filed as Exhibit 99.4 to the Company’s Current Report on Form 8-K, as filed on December 15,
2006 (File No. 001-16769), and incorporated herein by reference).
Amendment to Agreements, dated as of October 1, 2002, by and between Weight Watchers
International, Inc., WW Foods, LLC and H.J. Heinz Company (filed as Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, 2009, as filed
on November 12, 2009 (File No. 001-16769), and incorporated herein by reference).
Amendment to Operating Agreement, dated August 4, 2009, by and between Weight Watchers
International, Inc. and H.J. Heinz Company (filed as Exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended October 3, 2009, as filed on November 12, 2009
(File No. 001-16769), and incorporated herein by reference).
Exhibit
Number
†**10.21
†**10.22
†**10.23
**10.24
**10.25
†**10.26
†**10.27
†**10.28
†**10.29
†**10.30
Description
Second Amended and Restated Weight Watchers Executive Profit Sharing Plan, August 1, 2012
(filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter
ended September 29, 2012, as filed on November 8, 2012 (File No. 001-16769), and incorporated
herein by reference).
Offer Letter, dated as of July 2, 2012, by and between Weight Watchers International, Inc. and
Nicholas P. Hotchkin (filed as Exhibit 10.31 to the Company’s Annual Report on Form 10-K for
the fiscal year ended December 29, 2012, as filed on February 27, 2013 (File No. 001-16769), and
incorporated herein by reference).
Offer Letter, dated as of December 6, 2012, by and between Weight Watchers International, Inc.
and James Chambers (filed as Exhibit 10.34 to the Company’s Annual Report on Form 10-K for
the fiscal year ended December 29, 2012, as filed on February 27, 2013 (File No. 001-16769), and
incorporated herein by reference).
Credit Agreement, dated as of April 2, 2013, among Weight Watchers International, Inc., as the
borrower, the lenders party thereto, JPMorgan Chase Bank, N.A., as the administrative agent and
an issuing bank, and The Bank of Nova Scotia, as the revolving agent, a swingline lender and an
issuing bank (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended March 30, 2013, as filed on May 9, 2013 (File No. 001-16769), and incorporated
herein by reference).
Amendment Agreement, dated as of September 26, 2014, relating to the Credit Agreement, dated
as of April 2, 2013, among Weight Watchers International, Inc., as the Borrower, the Lenders party
thereto, JPMorgan Chase Bank, N.A., as the Administrative Agent and an Issuing Bank, and The
Bank of Nova Scotia, as the Revolving Agent, a Swingline Lender and an Issuing Bank (filed as
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended
September 27, 2014, as filed on November 5, 2014 (File No. 001-16769), and incorporated herein
by reference).
Severance Amendment, dated as of July 30, 2013, by and between Weight Watchers International,
Inc. and James Chambers (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, as
filed on August 1, 2013 (File No. 001-16769), and incorporated herein by reference).
Letter Agreement, dated as of May 8, 2013, by and between Weight Watchers International, Inc.
and Nicholas Hotchkin (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for
the fiscal quarter ended June 29, 2013, as filed on August 8, 2013 (File No. 001-16769), and
incorporated herein by reference).
Letter Agreement, dated as of May 8, 2013, by and between Weight Watchers International, Inc.
and James Chambers (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for
the fiscal quarter ended June 29, 2013, as filed on August 8, 2013 (File No. 001-16769), and
incorporated herein by reference).
Offer Letter, dated as of September 30, 2013, by and between Weight Watchers International, Inc.
and Lesya Lysyj (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
fiscal quarter ended March 29, 2014, as filed on May 8, 2014 (File No. 001-16769), and
incorporated herein by reference).
Statement of Principal Terms and Conditions of Employment, dated June 5, 2013, by and between
Weight Watchers (UK) Limited and Jeanine Lemmens (filed as Exhibit 10.35 to the Company’s
Annual Report on Form 10-K for the fiscal year ended January 3, 2015, as filed on March 4, 2015
(File No. 001-16769), and incorporated herein by reference).
Exhibit
Number
†**10.31
†**10.32
†**10.33
†*10.34
†*10.35
†*10.36
**10.37
†**10.38
*10.39
*21.1
*23.1
*31.1
*31.2
*32.1
Description
Offer Letter, dated as of July 4, 2013, by and between Weight Watchers (UK) Ltd and
Jeanine Lemmens (filed as Exhibit 10.36 to the Company’s Annual Report on Form 10-K for
the fiscal year ended January 3, 2015, as filed on March 4, 2015 (File No. 001-16769), and
incorporated herein by reference).
Letter Agreement, dated as of October 22, 2015, by and between Weight Watchers
International, Inc. and Jeanine Lemmens (filed as Exhibit 10.1 to the Company’s Current
Report on Form 8-K, as filed on October 23, 2015 (File No. 001-16769), and incorporated
herein by reference).
Offer Letter, dated as of March 3, 2014, by and between Weight Watchers International, Inc.
and Michael F. Colosi (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
for the fiscal quarter ended April 4, 2015, as filed on May 14, 2015 (File No. 001-16769), and
incorporated herein by reference).
Employment Agreement, dated October 6, 2003, by and between Weight Watchers France
S.A.R.L. and Corinne Pollier(-Bousquet) (the “Pollier Employment Agreement”).
Addendum to the Pollier Employment Agreement, dated May 1, 2013, by and between
Weight Watchers France S.A.R.L. and Corinne Pollier(-Bousquet).
Letter Agreement, dated as of September 15, 2015, by and between Weight Watchers
International, Inc. and Corinne Pollier(-Bousquet).
Share Purchase Agreement, dated October 18, 2015, between Weight Watchers International,
Inc. and Oprah Winfrey (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K,
as filed on October 19, 2015 (File No. 001-16769), and incorporated herein by reference).
Option Agreement, dated October 18, 2015, between Weight Watchers International, Inc. and
Oprah Winfrey (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, as filed
on October 19, 2015 (File No. 001-16769), and incorporated herein by reference).
Strategic Collaboration Agreement, dated October 18, 2015, between Weight Watchers
International, Inc. and Oprah Winfrey.
Subsidiaries of Weight Watchers International, Inc.
Consent of Independent Registered Public Accounting Firm.
Rule 13a-14(a) Certification by James Chambers, Chief Executive Officer.
Rule 13a-14(a) Certification by Nicholas P. Hotchkin, Chief Financial Officer.
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*Exhibit 101
*EX-101.INS
XBRL Instance Document
*EX-101.SCH
XBRL Taxonomy Extension Schema
*EX-101.CAL
XBRL Taxonomy Extension Calculation Linkbase
*EX-101.DEF
XBRL Taxonomy Extension Definition Linkbase
*EX-101.LAB
XBRL Taxonomy Extension Label Linkbase
*EX-101.PRE
XBRL Taxonomy Extension Presentation Linkbase
Filed herewith.
*
** Previously filed.
†
Represents a management arrangement or compensatory plan.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities 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: March 2, 2016
By:
/S/
JAMES CHAMBERS
James Chambers
President, Chief Executive Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities 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.
SIGNATURES
Date: March 2, 2016
Date: March 2, 2016
Date: March 2, 2016
Date: March 2, 2016
Date: March 2, 2016
Date: March 2, 2016
Date: March 2, 2016
Date: March 2, 2016
Date: March 2, 2016
Date: March 2, 2016
Date: March 2, 2016
By:
By:
By:
By:
By:
By:
By:
By:
By:
By:
By:
/S/
JAMES CHAMBERS
James Chambers
President, Chief Executive Officer and Director
(Principal Executive Officer)
/S/ NICHOLAS P. HOTCHKIN
Nicholas P. Hotchkin
Chief Financial Officer
(Principal Financial and Accounting Officer)
/S/ RAYMOND DEBBANE
Raymond Debbane
Director
/S/ STEVEN M. ALTSCHULER
Steven M. Altschuler
Director
/S/ PHILIPPE J. AMOUYAL
Philippe J. Amouyal
Director
/S/ CYNTHIA ELKINS
Cynthia Elkins
Director
/S/
JONAS M. FAJGENBAUM
Jonas M. Fajgenbaum
Director
/S/ DENIS F. KELLY
Denis F. Kelly
Director
/S/ SACHA LAINOVIC
Sacha Lainovic
Director
/S/ CHRISTOPHER J. SOBECKI
Christopher J. Sobecki
Director
/S/ OPRAH WINFREY
Oprah Winfrey
Director
Permanent employment agreement
Exhibit 10.34
Between
WEIGHT WATCHERS FRANCE whose registered office is located Immeuble « Le Florilège » 4 allée de la Fresnerie 78330
FONTENAY LE FLEURY, represented by Mr. Clive BROTHERS, acting in his capacity as Managing Director, below called “the
Company”
ON THE ONE HAND
And
Mrs. Corinne POLLIER-BOUSQUET
Domiciled at [REDACTED]
ON THE OTHER HAND
The parties hereto agree as follow:
1
EMPLOYER:
The Company may be substituted at any time to any company belonging to the group for the fulfillment of its contractual obligations.
HIRE:
From the 13 October 2003 and subject to the pre-medical examination, the Company hires Mrs. Corinne POLLIER-BOUSQUET
according to the conditions stated below.
th
The Company is subject to the provisions of the staff regulations and collective agreement existing since the 23 May 2003.
Mrs. Corinne POLLIER-BOUSQUET will benefit from the collective agreement applicable to the Company or to any company
where Mrs. Corinne POLLIER-BOUSQUET would be transferred.
rd
Mrs. Corinne POLLIER-BOUSQUET who accepts to be hired by the Company, formally declares not to be bound by any other
company and being free from any commitments regarding her last employer.
She commits to inform without delay the Company about any changes in her personal situation such as her address, her family
statute, etc…
PROFESSIONAL ROLE:
Mrs. Corinne POLLIER-BOUSQUET will be:
From the 13 October 2003 to the 31 December 2003:
th
st
FROM the 1 January 2004:
st
FUTURE MANAGING DIRECTOR
Her functions will be as follow (see the definition attached).
MANAGING DIRECTOR
The work will be executed by Mrs. Corinne POLLIER-BOUSQUET under the authority and within instructions given by her
supervisor, Mr. Clive BROTHERS, or other person designated by the Company.
CLASSIFICATION:
Mrs. Corinne POLLIER-BOUSQUET is a senior executive.
2
SALARY:
Mrs. Corinne POLLIER-BOUSQUET will be paid 120 000 € as gross salary over thirteen months. The monthly gross salary will then
be 9 230, 77 € x 13.
As regard to the global economic situation of the Company, to its own results and also to the personal achievement of Mrs. Corinne
POLLIER-BOUSQUET, the salary of the latter will be reconsidered on the 1 of July 2004 and every year upon mutual agreement.
st
This annual negotiation will take place regardless any legal or treaty provision applicable to the Company.
WORK DURATION:
As a senior executive, and with regard to the specific organization of the Company applicable to the employees, Mrs. Corinne
POLLIER-BOUSQUET will not be bound by the schedule applicable in the Company.
AWARD – BONUS:
Mrs. Corinne POLLIER-BOUSQUET will receive a bonus compliant with the rule in place in the Company applying to the Country
Managers of Weight Watchers Group. From the 1 January to 31 December 2004 a bonus of 60 000 € is guaranteed to Mrs. Corinne
st
POLLIER-BOUSQUET. For the first year, she will receive the highest value between this minimum and the result of the calculation
of the above mentioned rule in place.
st
WORKING PLACE:
Mrs. Corinne POLLIER-BOUSQUET will work at the Company headquarters, in Fontenay le Fleury or any place chosen by the
Company in Ile-de-France.
TRAVEL AND EXPENSE REIMBURSEMENT:
Because of her duties, Mrs. Corinne POLLIER-BOUSQUET may have to travel in France or outside, short or long term.
Mrs. Corinne POLLIER-BOUSQUET will be reimbursed of travelling and subsistence expenses upon receipt.
3
PROVISION OF A COMPANY CAR:
With regard to her duties, the Company will provide Mrs. Corinne POLLIER-BOUSQUET a Company car which will remain its
property. That provision will be effective the following month after her arrival and will remain for the length of the agreement.
The car can be used for a personal and professional purpose. The Company will cover all expenses related to the car upon receipt.
This provision is a benefit in kind regarding tax and social rules.
The insurance will be paid by the Company.
Mrs. Corinne POLLIER-BOUSQUET commits to inform the Company of any damages on the car within 48 hours maximum. The
Company will then take the necessary measures.
Mrs. Corinne POLLIER-BOUSQUET commits to keep the car in perfect conditions. Once the agreement is terminated, Mrs. Corinne
POLLIER-BOUSQUET commits to give the car, papers and keys back immediately at the office.
Mrs. Corinne POLLIER-BOUSQUET will be personally responsible for any parking or traffic fine. She will then pay in due time.
Mrs. Corinne POLLIER-BOUSQUET commits to inform the Company of any temporary or permanent withdrawal of license, of any
fine she would not have yet received the offence notification, in particular if she has to go to court because of the offence (speeding
for example). Once the agreement is terminated, Mrs. Corinne POLLIER-BOUSQUET commits to pay the whole fines that could be
claimed before or after termination of the agreement.
If Mrs. Corinne POLLIER-BOUSQUET does not comply with these rules, it could be qualified as a fault justifying the car collection.
PAID LEAVES:
Mrs. Corinne POLLIER-BOUSQUET will benefit of 2,5 days each working month and the French bank holidays. The period of
vacation will be decided by Mrs. Corinne POLLIER-BOUSQUET and her supervisor considering the needs of the Company.
No leave carryover will be allowed.
4
OBLIGATIONS:
Mrs. Corinne POLLIER-BOUSQUET commits to respect the instructions and the rules in place in the Company.
TRIAL PERIOD:
A three-month trial period will apply. Both parties will have the opportunity to terminate the agreement, without indemnity. The party
who does not wish to continue the contract must inform the other party in writing at least 8 days before the desired departure date.
This notice may be notified until the last day of the trial period.
Any interruption occurring during the trial period (illness, holidays) will extend the length of that period as it has to be effective work.
In case of extension of the trial period which cannot exceed three months, Mrs. Corinne POLLIER-BOUSQUET will be notified of
this extension eight days before the end of the termination of the first trial period.
During that extension, the trial can be interrupted by either party, within a prior notice of fifteen days. This notice can be notified
within the last day of the extension.
DURATION – PRIOR NOTICE:
The agreement is permanent.
At the end of the trial period, both parties can terminate the agreement. This is subject to the respect of the laws in force and after a
three month prior notice. No prior notice will be applicable in case of serious or gross misconduct.
EXCLUSIVITY:
During the agreement Mrs. Corinne POLLIER-BOUSQUET commits to exclusively work for the Company. No other professional
activity is allowed, even noncompetitive.
Mrs. Corinne POLLIER-BOUSQUET commits not to have any direct or indirect act of unfair competition during the agreement.
PUBLISHING:
Mrs. Corinne POLLIER-BOUSQUET commits not to publish any studies based on works done for the Company or its clients. She
also commits not to disclose any information, results of the clients, etc without the prior consent of the Company.
5
PROFESSIONAL CONFIDENTIALITY:
During the agreement and after its termination, Mrs. Corinne POLLIER-BOUSQUET commits not to disclose to any company or
person any confidential information that could foster competitors. She commits to keep secret any information regarding the finance
of the Company or the Company itself and any company belonging to the same Group or their clients.
Mrs. Corinne POLLIER-BOUSQUET commits to keep secret all the information she will gather in the frame of her duties or because
of the time she will spend in the Company.
Any failure to this obligation would be seen as a serious misconduct justifying a redundancy.
RESTITUTION AND USE OF THE COMPANY ASSETS:
Any assets of the Company that Mrs. Corinne POLLIER-BOUSQUET would have been entrusted with in her duties notably the files,
documentation, correspondence, books, keys, credit cards, vehicle registration, check books, cell phone and other documents remain
the Company’s property and will have to be returned.
Mrs. Corinne POLLIER-BOUSQUET will use them solely for a work purpose. She will not make any copy of them without the
express consent of the Company.
Mrs. Corinne POLLIER-BOUSQUET commits to return the so-called assets and any copy in her possession the day of her departure
from the Company for any cause. She will do it by herself without any prior or formal notice from the Company.
NON-COMPETE OBLIGATION:
For any reason of termination of the agreement, Mrs. Corinne POLLIER-BOUSQUET commits not to work for any competing firm
or to have any interest at any manufacturing and trading of products or services that could compete the activities of the Company.
6
This clause applies to any sort of termination of contract intervened as soon as the trial period will be finished.
By violating this clause, Mrs. Corinne POLLIER-BOUSQUET would have to pay a fine of 183 € to the Company. This amount will
have to be paid for each established breach without any prior notice to cease the prohibited activity. The allocation of the fine does
not waive the right of the Company to order under financial compulsion the cessation of the competing activity.
GOVERNING LAW – JURISDICTION:
The agreement is governed by French law. All disputes in connection with this agreement shall be addressed to the French courts.
Done in two original documents
In Fontenay le Fleury,
The 6 of October 2003
th
/s/ Linda Huett /s/ Corinne Pollier-Bousquet
Company Mrs. Corinne POLLIER-BOUSQUET
(read and approved)
Mrs. Linda HUETT
7
ADDENDUM TO THE EMPLOYMENT CONTRACT
DATED 6 OCTOBER 2003
Exhibit 10.35
BY AND BETWEEN THE UNDERSIGNED:
The company WEIGHT WATCHERS FRANCE, a French “société à responsabilité limitée”, the registered office of which is located at
7 boulevard des Chênes – parc Ariane – Bâtiment Mars – 78280 Guyancourt, registered with the business and trade register of
Versailles under number 722 063 427 00503, and duly represented by Nicholas Hotchkin in his capacity as Director of Weight
Watchers France.
Hereinafter referred to as the “Company”
ON ONE HAND,
AND
Mrs. Corinne Pollier-Bousquet, a French citizen, residing [REDACTED], and registered with the social security bodies under number
[REDACTED].
Hereinafter referred to as the “Employee”
ON THE OTHER HAND,
Together hereinafter referred to as the « Parties »
IT HAS BEEN AGREED AS FOLLOWS :
The present addendum amends the provisions of the Employee’s employment contract dated 6 October 2003 with the same object as
follows, the remaining terms and conditions of the initial employment contract remaining unchanged and in force:
JOB TITLE
1.
According to her initial employment contract dated 6 October 2003, the Employee held the position of Managing Director.
As per the present addendum, the Parties agreed that as from 1 May 2013, the Employee shall perform the duties of “President –
Continental Europe”, thus triggering the termination of her functions as Managing Director as from this date.
For the execution of her new duties, the Employee will report to James Chambers in his capacity as Chief Executive Officer of
Weight Watchers International, Inc, or any other person that may be substituted by the Company.
2. DUTIES AND RESPONSIBILITIES
In the frame of her functions as President Continental Europe, the Employee will mainly be in charge of the following duties :
Management of the continental European operational business including (i) contribution to the definition of the strategy of the
Continental Europe and developing such strategy, (ii) day to day supervision of each country General Manager in the Continental
European countries zone as necessary together with the supervision of the General Manager of Australia; (iii) defining the means and
resources necessary for the development of the turnover, (iv) ensuring clients satisfaction through the respect of the contractual
commitments, (v) managing and leading the teams under her responsibility and (vi) defining and implementing operational
procedures (vii) contribution to international strategy beyond Continental Europe.
These duties and responsibilities may be modified or changed in order to use in the best way the skills and abilities of the Employee
in light of the Company’s needs and organizational and adaptability objectives.
3. WORKING TIME
In the framework of her duties as “ President – Continental Europe”, the Employee has a high degree of accountability and benefits
from a large autonomy in the performance of her work and in the organisation of her schedule. In addition, she is duly empowered to
take decisions involving the Company and classified in the highest level in the Company. Thus, the Employee is involved in the
Company executive management.
As a result, the Employee belongs to the category of senior executive status (“cadres dirigeants”) with the meaning set out in
article L. 3111-2 of the French Labour Code. Thus, the Employee is not subject to the provisions of the French Labour Code related
to the duration of work, daily rest, bank holidays and the day of solidarity (“journée de solidarité”).
The Employee benefits however from provisions of the French labour Code regarding paid vacations as well as the time saving
account as the case may be.
4.
PLACE OF WORK
For information purposes, the Employee’s main place of work is located at 7 boulevard des Chênes – Parc Ariane – Bâtiment Mars –
78280 Guyancourt.
In the framework of the execution of her duties, the Employee shall travel in connection with her employment in France and abroad.
The Employee hereby agrees to travel in connection with her employment for periods that may (accumulatively but not continuously)
exceed three months, without constituting a modification of her employment contract.
However, it is agreed that, considering the nature of the Employee’s activity and the requirements linked with the organization and
smooth running of the Company, the Company may change the Employee’s work place within the administrative areas
(“départements”), of the Paris region, subject to a reasonable notice.
5. REMUNERATION
5.1 Base Salary
In consideration of the performance of her duties, the Employee shall receive an annual salary of a fixed amount of EUR 290,606.61
gross (the “Base Salary”) paid in 12 (twelve) equal monthly instalments, i.e. a gross monthly base salary of EUR 24,217.22, from
which shall be deducted the social security contributions and other contribution required by law or the applicable collective
bargaining agreements as the case may be.
The Employee’s salary is subject to review periodically in compliance with policies applicable within the Company.
5.2 Annual Bonus
In addition to the Base Salary, the Employee shall be entitled to an annual variable remuneration of up to 45% of the annual Base
Salary (the “Annual Bonus”). The Annual Bonus may exceed 45%, if the Company decides that it is appropriate to increase the
payment.
The bonus is awarded at the sole discretion of the Company .
The Employee will also be eligible to be included in the Weight Watchers International (WWI) Stock Option Plan.
The awards are subject to the continued employment of the Employee and shall be governed by the Weight Watchers International,
Inc.’s stock-based incentive compensation plan documents and relevant agreements
6.
NON COMPETE AND NON SOLLICITATION OF CLIENTS
Given the extreme sensitivity of the know-how and technical and commercial informations to which the Employee has access in the
framework of her duties and the extremely competitive nature of the activities of the Company and the other companies belonging to
the Weight Watchers Group, the Parties expressly agree on the necessity of the non-compete obligation in order to protect the
legitimate interests of the Company and the Weight Watchers Group.
The Parties agree that as a result of this non-competition obligation, as from the expiry of the notice period, and in the event of the
termination of the Employees’ contract for whatever reasons, the Employee undertakes:
(i) Not to carry on any business operating in the following countries Austria; Australia; Belgium; Denmark; France; Germany;
Netherlands; Sweden; Spain; or Switzerland that competes with the following activities: any activities relating to weight loss
management through diet and which relates food and nutrition.
(ii) Not to buy or hold participations in any Person regardless of their seat of incorporation, which carries on, directly or indirectly,
the activities listed under Paragraph (i) proceeding in the countries listed under Paragraph (i) ;
(iii) Not to perform any research and/or development activities, either for her own account and that of another person including a
supplier, customer, university, association, in connection with the products and activities referred to in section (i) above; except in the
case of a prior and express agreement from the Company or the Weight Watchers Group, which could not, in any case, concern such
activity for the account of a client.
(iv) Nor to act as an independent consultant / trainer / project development / project management Engineering / in connection with the
products and activities referred to in section (i) above.
In addition, the Employee expressly undertakes :
(A) For any product or activity referred to above, not to visit or contact the Company’s clients or to deal with any individual or
company that was a client or a prospect of the Company or any other company of the Weight Watchers Group and with whom the
Employee was in contact at any time during the three years preceding the termination of her employment contract:
(B) not to employ or induce to employ or seek to induce to leave either in her own interest or in the interest of any other Person any
employee, specialist/expert, manager or key manager who is an employee or corporate officer of the Company or any other company
of the Weight Watchers Group.
This clause will be applied for a six (6) -month period as of the last day of work of the Employee.
By way of remuneration for this non-compete obligation, and subject to the Employee’s complete compliance with her obligation, she
shall receive, for the duration of the non-compete obligation, a monthly compensation (including corresponding paid leave) in an
amount 75% equal to her average gross monthly remuneration calculated over the last 12 months preceding the notification of
termination of the contract.
This monthly compensation shall be subject to the social security contributions and other contributions required by law or the
applicable collective bargaining agreements, as the case may be.
The Employee expressly acknowledges that if she does not comply with such obligation, she risks losing the compensation defined
above and having to reimburse to the Company the sums paid in relation to the non-compete obligation, regardless the sanctions and
penalties set out hereafter.
In case of breach by the Employee of this non-compete obligation, she shall automatically pay to the Company a penalty which is
presently fixed at a flat rate equal to the amount of the monthly compensation stated above. This penalty will be due for each breach,
without prior notice to cease the competitive activity.
The payment of this penalty shall not deprive the Company from its rights to sue the Employee for damages due to the economic and
moral harm linked to the breach by the Employee of her non-compete obligation or from its rights to seek an injunction against the
Employee to cease immediately the competitive activity.
However, the Company shall have the right to waive the non-compete obligation and thus to waive the Employee’s right to the
payment of the non-compete compensation, either at any time during the execution of the employment relationship, or upon the
termination of the employment contract.
The decision to waive the non-compete obligation shall be notified to the Employee by registered letter with acknowledgment of
receipt, at the latest upon the date of the effective departure of the Employee.
7. REMAINING TERMS AND CONDITIONS
The remaining terms and conditions of the initial employment contract entered into between the Employee and the Company on
6 October 2003 which are not amended by this addendum remain unchanged and in force.
8. GOVERNING LAW
The contract as well as the rights and obligations of the Parties which result there from shall be governed by and construed in
accordance with French law. In the event of a dispute between the Company and the Employee, French jurisdiction shall be
competent.
9.
LANGUAGE
The present employment contract is drafted in English and French language on which both Parties agree. The English version is made
for information purposes only. In case of dispute the French version only shall prevail.
Executed in Guyancourt, on
In two originals, one for each Party.
/s/ Nicholas Hotchkin
For WEIGHT WATCHERS FRANCE*
Nicholas Hotchkin
Duly empowered for the purpose hereof
/s/ Corinne Pollier-Bousquet
Madame Corinne POLLIER-BOUSQUET *
*Before signing, both Parties handwrite the following: «Read and approved.
Good for agreement on all the terms and conditions included»
Exhibit 10.36
September 15, 2015
Corinne Pollier-Bousquet
[REDACTED]
[REDACTED]
Dear Corinne,
Reference is made in this letter agreement to the (i) Employment Agreement, dated October 6, 2003, by and between Weight
Watchers France (“WW France”) and you (the “Employment Agreement”); (ii) Addendum to the Employment Agreement, dated
May 1, 2013, by and between WW France and you (the “Addendum” and together with the Employment Agreement, the
“Employment Contracts”); and (iii) Amended and Restated Continuity Agreement, dated as of September 15, 2015, by and between
Weight Watchers International, Inc. (“WWI” and together with WW France, the “Company”) and you (the “Continuity Agreement”).
As we recently discussed, in connection with your entering into the Continuity Agreement, and notwithstanding any terms and
conditions of the Continuity Agreement or any Other Arrangement (as defined below), you hereby agree that any consideration
payable to you, or obligation to provide benefits to you, pursuant to the Continuity Agreement shall be offset in full by any amounts
payable or benefits provided to you pursuant to the Employment Contracts or any other agreement between you and the Company or
any of its affiliates, any plan, program or arrangement of the Company or any of its affiliates, or as provided for by statute, regulation
or local law in any applicable jurisdiction (collectively, the “Other Arrangements”). In the event any such payment or benefit is first
paid or provided to you pursuant to (i) an Other Arrangement, such payment or benefit shall offset in full any payment or benefit to
be provided under the Continuity Agreement, and (ii) the Continuity Agreement, such obligations under the Other Arrangements will
be deemed to have been satisfied in full by the corresponding amount paid or benefit provided under the Continuity Agreement.
[Remainder of Page Intentionally Left Blank]
Kind regards,
/s/ James Chambers
James Chambers
Chief Executive Officer
AGREED AND ACCEPTED:
/s/ Corinne Pollier-Bousquet
Corinne Pollier-Bousquet
September 15, 2015
Date
Exhibit 10.39
EXECUTION VERSION
THIS AGREEMENT SHALL ONLY CONSTITUTE A BINDING AGREEMENT WHEN
FULLY SIGNED BY ALL PARTIES AND EXCHANGED BETWEEN THEM.
STRATEGIC COLLABORATION AGREEMENT
This Strategic Collaboration Agreement (this “Agreement”) is entered into this 18th day of October, 2015, and is by and among,
on the one hand, Weight Watchers International Inc., a Virginia corporation, having an address at 675 Avenue of the Americas, 6
TH
Floor, New York, New York 10010 (“WW”); and Oprah Winfrey, an individual having a mailing address at c/o Harpo, Inc. 1041
North Formosa Avenue, West Hollywood, CA 90046 (“OW”)”. Each of WW and OW is referred to herein as a “Party” and,
collectively, as the “Parties”.
Statement
WHEREAS, WW is a worldwide business offering services and products to help individuals safely lose weight and maintain a
healthy weight;
WHEREAS, WW is the worldwide owner of the trademarks and service marks listed in Exhibit A, annexed hereto and made a
part hereof, for diet, weight loss and weight maintenance programs, products and services (the “WW Marks”);
WHEREAS, OW is an internationally well-known media proprietor, talk show host, actress, producer, and philanthropist, the
owner of the OW Image (as defined herein),
WHEREAS, Harpo, Inc., an entity wholly owned by OW, is the owner of the trademarks and service marks listed in Exhibit B,
annexed hereto and made a part hereof and OW Licensing Company, LLC, an entity wholly owned by OW, is the owner of rights of
publicity associated with OW (collectively, said trademarks, service marks and rights of publicity are collectively referred to as the
“Oprah Marks”), and OW hereunder acts on behalf of Harpo. Inc. and OW Licensing Company, LLC for all matters related to the
Oprah Marks;
WHEREAS, immediately prior hereto or simultaneously herewith, the Parties have entered into or are entering into that certain
Term Sheet for Consulting Stock Option Awards and that certain Share Purchase Agreement, among other related agreements
(collectively, the “Other Agreements”), as the case may be, all on the terms and conditions set forth in greater detail in the Other
Agreements;
WHEREAS, incident to the Other Agreements, the Parties are entering into this Agreement, pursuant to which (i) WW will
grant to OW the right to use one or more of the WW Marks, (ii) OW will grant to WW the right to use one or more of the Oprah
Marks and the OW Image, and (iii) OW will provide to WW (and its designees, including direct and indirect subsidiaries) certain
services, and the Parties will collaborate with each other; in each case, all on the terms, conditions and limitations specifically set
forth herein;
NOW THEREFORE, in consideration of the mutual promises and covenants set forth herein, and in the Other Agreements,
and for other good and valuable consideration, the exchange and sufficiency of which is hereby acknowledged, the Parties agree as
follows:
1.
Certain Definitions.
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
“Advertising Channels” means all media, now known or hereinafter devised, including but not limited to, television,
radio, print, outdoor, b-roll video, Internet, interaction with the press and media, stores and meeting rooms, WW’s
websites, third party websites, and public and investor relations, social media platforms (including Facebook, Twitter,
Instagram, YouTube, Pinterest, and similar media now known or hereinafter developed), in flight, direct to consumer,
jumbotrons, sales films, internal, corporate and industrial uses, meetings or events sponsored and/or attended by WW,
electronic, digital, mobile, including personal handheld devices (e.g., tablets, iPads and similar devices), and consumer
and trade print.
“Losses” means losses, claims, causes of action, demands, damages, obligations, penalties, fines, suits, assessments,
judgments, liabilities, costs or expenses whatsoever (including reasonable attorneys’ fees, including any incurred in
enforcement of any provision of this Agreement).
“Marks” means, as used in each instance, either the WW Marks or the Oprah Marks.
“Materials” means all tangible materials disseminated by or through any one or more of the Advertising Channels,
including, without limitation, programs, program materials, press materials, printed materials, press kits, news releases,
filmed or recorded interviews, books, recipes, newsletters/columns, web site content, software applications, b-roll
footage, scripts, story boards, advertising, promotional materials, commercials, videos, photographs, catalogs, packages,
point of sale displays, posters, sound recordings, voice-overs, artwork, coloration, packaging, designs, graphics, labels,
boxes, bags, tags, wrappers, cartons, containers, wrapping, and any and all other visual and oral content, created
hereunder.
“OW Image” means OW’s name (in whole or in part), image, photograph, likeness, statement, persona, voice, signature,
endorsement, and biography.
“Oprah Marks” shall have the meaning set forth in the preamble.
“Permitted Uses” means the right to use, publish, transmit, license, disseminate, distribute and otherwise exploit the
WW Marks, the Oprah Marks, and the OW Image, on or in connection with Materials disseminated in and through the
Advertising Channels, in each case, on the terms, conditions and limitations set forth herein.
“Weight Management Products” means any business, program, products, services or endeavor related to diet, weight
loss or weight management activities.
2
1.9
“Weight Watchers Programs” means the Weight Management Products and other similar or related programs, products,
services and regimes designed, defined, marketed or adopted by WW, as may be developed, modified, and amended by
WW, in its sole discretion, from time to time.
1.10 “WW Marks” shall have the meaning set forth in the preamble.
2.
Grants.
2.1
Reciprocal Grant of Rights.
2.1.1. OW hereby grants to WW the right and license to make all Permitted Uses of the Oprah Marks (pursuant to a
royalty-free license to OW from Harpo, Inc. and OW Licensing Company, LLC) for and in connection with the
Weight Watchers Programs, collaborating with OW in the enhancement of the Weight Watchers Programs and
in connection with supporting and promoting WW, in each case, subject to OW’s prior review and approval, as
set forth herein.
2.1.2. OW hereby grants to WW the right and license to make all Permitted Uses of the OW Image (pursuant to a
royalty-free license to OW from Harpo, Inc. and OW Licensing Company, LLC) for and in connection with the
Weight Watchers Programs, collaborating with OW in the enhancement of the Weight Watchers Programs, and
in connection with supporting and promoting WW, in each case, subject to OW’s prior review and approval, as
set forth herein.
2.1.3. WW hereby grants to OW the right and license to make all Permitted Uses of the WW Marks for and in
connection with promoting the Weight Watchers Programs, collaborating with WW in the enhancement of the
Weight Watchers Programs, in connection with performing any or all of the services (as set forth herein), and in
connection with supporting and promoting WW, in each case, subject to WW’s prior review and approval, as set
forth herein.
2.1.4. All Permitted Uses in Materials of each and all of the Oprah Marks and the OW Image shall be submitted to
OW (or her specified designee, who shall act on her behalf and be subject to all obligations of confidentiality
with respect to the Confidential Information (as defined herein)) for prior review and approval. Either approval
or disapproval (which must include all reasons for disapproval and the means to address them) shall be provided
in writing as soon as commercially practicable. All re-submissions shall likewise be addressed as soon as
commercially practicable. All Materials not approved in writing shall be deemed disapproved.
2.1.5. All Permitted Uses in Materials of the WW Marks shall be submitted to WW for prior review and approval.
Either approval or disapproval (which
3
must include all reasons for disapproval and the means to address them) shall be provided in writing as soon as
commercially practicable. All re-submissions shall likewise be addressed as soon as commercially practicable.
All Materials not approved in writing shall be deemed disapproved.
2.1.6. For the avoidance of doubt, WW shall have the right to use and refer, without OW’s prior approval under this
Agreement, to any one or more of the Oprah Marks and the OW Image in connection with discharging any of
WW’s responsibilities for making any public disclosures, public or governmental filings, and otherwise to
comply with any law, rule, regulation or requirement applicable to WW, as WW deems reasonably necessary in
its public company reporting. Notwithstanding the foregoing, WW shall exercise all reasonable efforts to
consult in advance with OW with respect to the use of the Oprah Marks and the OW Image for such public
company reporting, and to consider in good faith OW’s comments with respect thereto.
2.2
Collaboration and Consulting Services.
2.2.1. OW and WW will collaborate with each other towards the mutual objective of advancing and promoting the
Weight Watchers Programs and WW, and in connection therewith, OW shall consult with WW and provide the
services described herein (including making appearances, as described below), and shall consult with WW and
participate in developing, planning, executing and enhancing the Weight Watchers Programs and related
initiatives. In connection therewith, OW (and her designated staff, which shall act on her behalf and subject to
all obligations of confidentiality with respect to the Confidential Information hereunder) shall consult and
participate in the design, creation, planning, execution of creative strategy, development of the Materials and
Advertising Channels, and the related execution of the consumer experience in connection with the Weight
Watchers Programs.
2.2.2.
In connection with such collaboration, OW shall participate in the development and execution of the 2016
Weight Watchers Program (including Materials); provided, however, that the Parties acknowledge that such
collaboration is already ongoing with respect to the 2016 Weight Watchers Program, which is intended to
launch in December 2015.
2.2.3. At OW’s request, the CEO of WW shall be available to make any in-person presentation and “top to bottom”
review and presentation of WW’s activities and results no less frequently than quarterly in each annual period.
2.2.4. OW shall be a member of the Weight Watchers Programs and shall be available to make personal appearances
on behalf of WW, and participate in activities
4
such as appearing in advertisements and promotions, as OW determines appropriate and as the Parties may
mutually agree, subject to OW’s availability, as applicable.
2.2.5.
In the event that OW (or OW’s designee if such designee shall have been requested by WW) is required to
travel in connection with providing the services under this Agreement, the Parties will discuss and agree upon,
in advance, all travel and accommodations required by OW (or, as applicable, her designee), and the amount of
any costs or fees, if any, to be borne by WW in connection therewith. Any and all travel plans, costs, fees and
responsibilities shall be only as mutually agreed between the Parties. For the avoidance of doubt, any such travel
obligations, costs or fees for the same for OW shall be separate and apart from any such travel required for
participation on WW’s Board.
2.2.6. OW shall use all reasonable efforts, in her discretion, to make reference to and be publicly supportive of WW
and the Weight Watchers Programs. Any public statements by OW regarding diet, weight loss or weight
management shall be consistent with any of the Weight Watchers Programs.
3.
Term.
3.1
3.2
Initial Term. The term of this Agreement shall commence upon the full execution and exchange of this Agreement, and
shall continue for an initial term of five (5) years, (the “Initial Term”), unless sooner terminated as provided herein.
Renewal Term. This Agreement shall be automatically renewed and extended, for successive additional periods of one
(1) year, each commencing upon the expiration of the Initial Term (each a “Renewal Term”, and together, the “Renewal
Terms”), until such time as (i) either WW or OW provides the other Party with no less than six (6) months written
notice of its intent not to extend this Agreement for the next Renewal Term, in which case, this Agreement shall
terminate and expire at the end of the Initial Term or the then-current Renewal Term, or (ii) this Agreement is not
otherwise sooner terminated in accordance with its terms. All terms and conditions of this Agreement shall remain in
full force and effect for the Renewal Terms, if any, unless OW and WW mutually agree otherwise in writing signed by
or on behalf of all such Parties and exchanged between them. The Initial Term, together with any Renewal Terms, shall
constitute the “Term.”
3.3 No Usage after the Term; Run-Off. Upon expiration or termination of this Agreement, it is understood that WW shall
have no further right to continue to create, use or disseminate Materials incorporating the Oprah Marks or the OW
Image; provided, however, that (i) in the event of the expiration of this Agreement pursuant to Section 3.2 hereof, WW
shall have the right to continue to use and disseminate printed Materials incorporating the Oprah Marks or the OW
Image
5
existing as of such date through all Advertising Channels for the remainder of the then-current calendar year, and (ii) in
the event of other termination of this Agreement, WW shall have the right to continue to use and disseminate printed
Materials incorporating the Oprah Marks or the OW Image existing as of such date through all Advertising Channels for
a period that shall be the longer of (a) six (6) months from the date of written notice, and (b) from the date of such
written notice through the remainder of the then-current calendar year (in each case, the “Run-Off Period”). WW will
not create any new printed Materials using the Oprah Marks or the OW Image during the Run-Off Period. The Parties
confirm that after the expiration or termination of this Agreement, any continued use by third parties of any such
Materials that were already disseminated by or on behalf of WW in accordance with this Agreement shall not constitute
a breach by WW hereunder, however WW shall use good faith efforts to remove and destroy such Materials, subject to
any applicable Run-Off Period. Notwithstanding anything to the contrary contained herein, WW may continue to retain
in its archival files any materials incorporating one or more of the Oprah Marks and the OW Image, including the
Materials, but no further use may be made thereafter without OW’s written approval. Nothing herein shall prevent WW
from using or re-using, in perpetuity and without limitation, any Materials where the Oprah Marks and OW Image, as
applicable, have been removed.
3.4 Notwithstanding anything to the contrary contained herein, this Agreement shall automatically terminate and expire in
the event of the failure of the Closing Date (as such term is defined in the Other Agreements) to occur prior to
November 18, 2015.
4.
Non-Competition.
4.1 Other Products. During the Term of this Agreement, OW agrees not to provide to any person or entity other than WW
any right or license to use or otherwise exploit the Oprah Marks and the OW Image for or in connection with any weight
loss programs or weight maintenance programs other than the Weight Watchers Programs. For purposes of clarity, and
as examples only and without limitation, OW shall have no restriction of any kind with respect to speeches, seminars,
tours, books, television programs, digital information, endorsements, social media, or any other media offerings,
activities, or endeavors of any kind, now or hereafter known, which are authored or created by OW or under OW’s
authority, or which utilize Oprah Marks or the OW Image, with respect to diet, healthy living, spirituality, faith, recipes,
cooking, lifestyle, foods and food products provided however that to the extent weight loss or weight management is
relevant to any such activities, OW may freely address issues of weight loss and weight maintenance, so long as OW
does not endorse or advocate for weight loss or weight maintenance approaches other than Weight Watchers Programs.
4.2
Competitive Restrictions. During the Term of this Agreement, and one (1) year after the expiration or termination of this
Agreement, neither OW nor its designees, directly or indirectly, (whether individually or as an owner, partner,
6
joint venture, stockholder, employee, broker, agent, principal, trustee, corporate officer, director, licensor, or in any
other capacity whatsoever), shall engage in (or induce or solicit any third party to engage in), any Weight Management
Products other than the Weight Watchers Programs.
5.
Non-Disparagement; Ownership.
5.1 Non-Disparagement. Each Party acknowledges the value and goodwill associated with the other Party’s Marks and
agrees that it will use and refer to the other Party’s Marks in a manner designed to protect and enhance the reputation
and integrity of such Marks and, as applicable, the OW Image. Each Party shall not exercise the rights granted under
this Agreement in any manner that would dilute, denigrate or otherwise diminish the value, the goodwill or the
reputation associated with the other Party’s Marks or, as applicable, the OW Image. No Party will make any statements
or comments of a defamatory or disparaging nature to third parties regarding the other Party or its officers, directors,
personnel, shareholders, services or products. To the extent any rights in and to the either Party’s Marks are deemed to
accrue to the other Party, as a matter of law or otherwise, each Party hereby assigns any and all such rights in and to the
other Party’s Marks, at such time as they may be deemed to accrue, including all related goodwill, to the other Party, as
applicable.
5.2 Ownership of the WW Marks. OW acknowledges and agrees that WW owns exclusively all of the intellectual property
rights and all other right, title and interest in and to the WW Marks and the goodwill pertaining thereto, and that all
rights, including any ownership interests, accruing from use by OW (or any of its designees) accrues exclusively to
WW. OW agrees that it shall not, at any time during the Term of this Agreement or after its expiration or termination,
contest the validity of WW’s ownership of or ability to control the WW Marks. OW acknowledges and agrees that its
right to use the WW Marks derives solely from this Agreement and is limited to the uses expressly permitted hereunder,
all solely pursuant to and in compliance with this Agreement, and that OW will not obtain any additional right, title or
interest in or to any of the WW Marks by reason of its licensed use.
5.3 Ownership of the Oprah Marks. WW acknowledges and agrees that OW ( or its related entities) owns exclusively all of
the intellectual property rights and all other right, title and interest in and to the Oprah Marks and the goodwill
pertaining thereto, and that all rights, including any ownership interests, accruing from use by WW (or any of its
designees, including direct and indirect subsidiaries) accrues exclusively to OW ( or its related entities). WW agrees that
it shall not, at any time during the Term of this Agreement or after its expiration or termination, contest the validity of
OW’s or its related entities’ ownership of or ability to control the Oprah Marks. WW acknowledges and agrees that its
right to use the Oprah Marks derives solely from this Agreement and is limited to the uses expressly permitted
hereunder, all solely pursuant to and in compliance with this Agreement, and that WW will not obtain any additional
right, title or interest in or to any of the Oprah Marks by reason of its licensed use.
7
5.4 Ownership of Newly Developed Names or Marks. In the event that, as part of the collaboration among the Parties
described herein, one or more new names or marks is developed (whether or not actually used) (the “New Names”),
such New Names shall be owned by and shall be the sole and exclusive property of WW (or its designees, including
direct and indirect subsidiaries); and WW shall have the right to register and claim the New Names in any manner, in
any form and in any country, in its own name; provided, however, that any New Names shall thereupon be added to and
included within the definition of WW Marks hereunder (and subject to the license to OW hereunder) during the Term.
Notwithstanding the foregoing, unless OW shall provide written approval, no use of the Oprah Marks or OW Image, nor
any reference to OW indirectly without use of the Oprah Marks or OW Image, may be included in any New Names.
5.5 Ownership of New Programs. In the event that, as part of the collaboration among the Parties described herein,
enhancements are made, new features are added, or new plans introduced as Weight Watchers Programs (the “New
Programs”), such New Programs shall be owned by and be the sole and exclusive property of WW (or its designees,
including direct and indirect subsidiaries); and WW shall have the right to register and claim any proprietary protection
(including patents, trademarks, copyrights and trade secrets) in the New Programs in its own name (or in the name of its
designees, including direct and indirect subsidiaries); provided, however, that any New Programs shall be added to and
included in the definition of the Weight Watchers Programs hereunder. Notwithstanding the foregoing, unless OW shall
provide written approval, no use of the Oprah Marks or OW Image, nor any reference to OW indirectly without use of
the Oprah Marks or OW Image, may be included in any New Programs.
5.6 Ownership of Materials. Any trademarks, service marks, trade secrets, trade names, copyrights, design rights, patents or
similar proprietary right that may be created in or in connection with any Materials (including in connection with any
New Names or New Programs), or otherwise under this Agreement, shall be the sole property of WW. OW shall do any
and all acts reasonably required by WW to confirm such ownership by WW and to preserve, maintain, protect and
enforce said rights, at WW’s cost. WW shall own, from inception, all Materials, and OW agrees to provide any and all
confirmation in writing as reasonably requested by or on behalf of WW to confirm such ownership by WW. All
Materials that qualify for treatment as “works made for hire” within the meaning of 17 U.S.C. Section 101, shall be
treated as such for the benefit of WW. To the extent that any portion of such Materials is not a work made for hire, OW
hereby completely, irrevocably and without reservation assigns to WW, all right, title and interest in and to such portion
of the Materials, as well as all related copyright, patent, trade secret and other proprietary rights therein. WW shall have
the full and unfettered right to secure copyright and trademark registrations in its own name for the Materials and any
versions or revisions thereof. Notwithstanding the foregoing,
8
in the event such Materials, with OW’s written approval, include the Oprah Marks or OW Image, WW shall not hereby
claim any right or ownership in any of the Oprah Marks or the OW Image, and OW (or its designee) shall own all right,
title and interest in the Oprah Marks and the OW Image.
5.7 OW shall execute and deliver and any all written instruments reasonably requested by or on behalf of WW to confirm
the ownership of any New Names and New Programs by WW (or its designees, including direct and indirect
subsidiaries).
6.
Effect of Expiration.
6.1.1. Upon expiration or termination, each Party shall immediately discontinue all use of the other Party’s Marks and
any variation or simulation thereof, subject to Section 3.3 hereof.
6.1.2. OW (or its designee) shall either (i) deliver to WW (or its designee) free of charge, all materials supplied to OW
from WW, (ii) all Materials bearing or incorporating any WW Marks, (iii) all of WW’s Confidential
Information, and (iv) at WW’s option, destroy all such materials and deliver written confirmation of such
destruction.
6.1.3. WW (or its designee) shall either (i) deliver to OW (or its designee) free of charge, all materials supplied to
WW from OW, (ii) all Materials bearing or incorporating any Oprah Marks, (iii) all of Oprah’s Confidential
Information, and (iv) at OW’s option, destroy all such materials and deliver written confirmation of such
destruction, in each case, subject only to Section 3.3. hereof.
7.
Representation and Warranties.
7.1
Representations of OW. OW represents and warrants that (a) OW is not nor will she be subject to any obligation, legal
disability or restriction which will or might prevent OW from fully complying with their respective obligations
hereunder or which will create any liability on the part of WW; (b) the performance by each of OW of her obligations
hereunder will not violate any agreement nor be inconsistent with any other obligation of OW, or infringe upon or
violate the rights of any third parties; (c) OW will ensure that Harpo, Inc. and OW Licensing Company, LLC will not
act in any manner that compromises or is inconsistent with OW’s obligations with respect to the use of the Oprah Marks
and the OW Image under this Agreement, and (d) OW shall not make any public statement regarding, or endorsement
of, WW, the WW Marks or the Weight Watchers Programs in a manner where such statement or endorsement (i) is false
or misleading, (ii) fails to properly disclose (as required by law and using substantially the terms provided by WW, if
any) OW’s relationship to WW, the WW Marks, or the Weight Watchers Programs, as applicable, or (iii) is otherwise in
violation of applicable law, regulation or regulatory guidelines, including without limitation, the FTC Guides
Concerning the Use of Endorsements and Testimonials in Advertising.
9
7.2
Representations of WW. WW represents and warrants that (a) WW is not nor will WW be subject to any obligation,
legal disability or restriction which will or might prevent WW from fully complying with its obligations hereunder or
which will create any liability on the part of OW; (b) the performance by WW of its obligations hereunder will not
violate any agreement nor be inconsistent with any other obligation of WW, or infringe upon or violate the rights of any
third parties; and (c) WW shall not make any public statement regarding, or endorsement of, OW, the Oprah Marks or
the OW Image in a manner where such statement or endorsement (i) is false or misleading, (ii) fails to properly disclose
(as required by law and using substantially the terms provided by WW, if any) WW’s relationship to OW, the Oprah
Marks or the OW Image, as applicable, or (iii) is otherwise in violation of applicable law, regulation or regulatory
guidelines, including without limitation, the FTC Guides Concerning the Use of Endorsements and Testimonials in
Advertising.
7.3
Commissions. OW represents and warrants that WW shall not be under any obligation for the payment of any
commissions to any agents or brokers on account of this Agreement or the services to be rendered by OW hereunder.
8.
Indemnification.
8.1 WW shall indemnify, defend and hold harmless OW and its past, current and future parents, subsidiaries, affiliates,
officers, directors, principals, employees, attorneys, agents and representatives, and their respective predecessors,
successors and assigns individually and in the aggregate, from and against and in respect of any and all Losses, to the
fullest extent permitted by law for which they or any of them may become liable, arising out of or resulting from (i) the
falsity or inaccuracy of any material representation or warranty made by WW herein, (ii) the use of any of the WW
Marks in accordance with the terms herein, (iii) the negligence or willful misconduct of WW or (iv) any use, advertising
or promotion of the Weight Watchers Programs.
8.2 OW shall indemnify, defend and hold harmless WW and its past, current and future parents, subsidiaries, affiliates,
officers, directors, principals, employees, attorneys, agents and representatives, and their respective predecessors,
successors and assigns individually and in the aggregate, from and against and in respect of any and all Losses, to the
fullest extent permitted by law for which they or any of them may become liable, arising out of or resulting from (i) the
falsity or inaccuracy of any material representation or warranty made by OW herein, (ii) the use of the Oprah Marks in
accordance with the terms herein, (iii) the use of the OW Image in accordance with the terms herein, and (iv) the
negligence or willful misconduct of OW.
10
8.3
If any person or entity asserts any notice, claim, proceeding, or brings any suit or action for which WW, on the one
hand, and OW, on the other hand (each an “Indemnifying Party”) may be required to indemnify the other such Party
(including their current and future parents, affiliates, and subsidiary companies) (the “Indemnified Party”) under
Section 8.1 or 8.2, the Indemnified Party promptly shall notify the Indemnifying Party of such claim or suit. The
Indemnifying Party, upon receipt of such notice, shall undertake in conjunction with the Indemnified Party (if the
Indemnified Party desires) the defense of such suit or the settlement of any such claim at the Indemnifying Party’s own
cost and expense. The Indemnifying Party shall have the right to control at any time on its own behalf, the settlement or
defense of any such notice, claim, proceeding, suit or action with its own counsel and at its own expense; provided
however, that nothing shall preclude the Indemnified Party from also retaining counsel of its choice at its sole expense.
Under no circumstances shall the Indemnifying Party settle, compromise, or otherwise enter into any agreement
regarding the disposition of any such claims without the prior written consent and approval of the Indemnified Party,
which shall not be unreasonably withheld or delayed.
9.
Jurisdiction, Governing Law.
9.1 Governing Law. This Agreement and all claims (including without limitation claims based in contract, statute or tort)
arising out of or relating to this Agreement, its interpretation, validity and enforcement shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York applicable to contracts made, and to be
performed wholly, in the State of New York. All disputes between OW, on the one hand, and WW, on the other, shall be
addressed and adjudicated in federal district court for the Southern District of New York in New York City (New York
County) and the Parties hereby waive any objection either could raise with respect to convenience, suitability or
appropriateness of such forum.
10. Miscellaneous.
10.1 Notices. All notices, requests, consent, demands (including service of process), approvals and other communications
hereunder shall be deemed to have been duly given, made or served if in writing and delivered personally or sent by
overnight carrier or by e-mail transmission with receipt confirmed, to the respective parties to this Agreement as
follows:
If to OW:
c/o Harpo, Inc.
1041 North Formosa Avenue
West Hollywood, CA 90046
with a copy to:
11
Loeb & Loeb LLP
345 Park Avenue
New York, NY 10154
(212) 407-4000
Attn: Marc Chamlin, Esq.
mchamlin@loeb.com
If to WW:
Weight Watchers International, Inc.
675 Avenue of the Americas, 6 Floor
New York NY 10010
Telephone: (212) 817-4277
Attn: General Counsel
E-Mail: michael.colosi@weightwatchers.com
TH
with a copy to:
Katten Muchin Rosenman LLP
575 Madison Avenue
New York, NY 10022
Telephone: (212) 940-8800
Attn: Karen Artz Ash, Esq.
E-Mail: karen.ash@kattenlaw.com
10.2 Relationship of Parties. Nothing herein contained shall be deemed to create under this Agreement an agency, joint
venture, partnership or franchise relationship between WW, on the one hand, and OW, on the other hand. OW
acknowledges that OW (including each of her designees) are independent contractors, and are not agents or employees
of WW, are not entitled to any WW employment rights or benefits and are not authorized to act on behalf of WW. OW
shall be solely responsible for any and all tax obligations of OW, including but not limited to, all city, state and federal
income taxes, social security tax and other self-employment taxes incurred by OW, and WW shall not be responsible for
withholding any such taxes.
10.3 Assignability. This Agreement is of a personal nature with respect to OW, and therefore, neither this Agreement nor any
of the rights, obligations, and commitments of OW hereunder may be sublicensed, granted, assigned, transferred or
encumbered. Nothing herein, however, shall affect WW’s rights to assign, transfer, or otherwise encumber this
Agreement or any of its rights hereunder in its sole discretion, provided that WW’s obligations shall continue to remain
in full force hereunder and no such assignment shall grant or permit the right to use the Oprah Marks and OW Image
except in accordance with the terms hereof and only with respect to the Weight Watchers Programs as approved
hereunder by OW. Except as otherwise provided herein, this Agreement shall inure to the benefit of and shall be binding
upon OW and WW, respectively, and their permitted successors, assigns and heirs.
12
10.4 Public Announcements Concerning this Agreement. All press releases or other written public communications of any
sort relating to this Agreement and the consummation of the transactions contemplated hereby, or any transactions
arising therefrom, will be subject to the prior written mutual approval of the Parties; provided, however, that nothing
herein will prevent WW (including its designees, including direct and indirect subsidiaries) from making public
announcements, releases or disclosures to the extent required to comply with the requirements of any law, rule,
regulation or any listing agreement with any securities exchange or, as WW may otherwise deem necessary as a publicly
traded company.
10.5 Confidential Information. OW acknowledges that all information relating to the business and operations of WW which
is disclosed to one or both of them, or which one or both of them acquires, during the Term of this Agreement, including
without limitation, any data, programs, campaigns, materials, records, papers, documents, questions, guides, transcripts,
findings, studies, databases, surveys, results, presentations, reports, analyses, customer, client or user information,
experience, formulae, methods, processes, techniques, strategies and business plans are valuable, proprietary
information of WW (“Confidential Information”). For purposes of this Section, all recipes, formulations, specifications,
costs, expenses, projected and actual sales, communications, advertising and promotional strategies and business plans
for marketing the Weight Watchers Programs developed by WW or in collaboration with OW in contemplation of and
during the continuance of this Agreement shall be considered Confidential Information owned by WW. OW
acknowledges the need to preserve the secrecy and confidentiality of the Confidential Information, during and after the
termination or expiration of this Agreement and neither shall disclose or use, directly or indirectly, the Confidential
Information for any purpose other than the performance of its obligations under this Agreement. OW (and her
designees) shall handle and protect Confidential Information with the same degree of care that it applies to its own
Confidential Information, but in no event less than reasonable care. OW agrees to restrict the disclosure of Confidential
Information to those of her representatives having a need to know and to ensure that any such representative who has
access to the Confidential Information comply with the terms and conditions of this Agreement in the same manner as
they are bound hereby, or by a separate written agreement with terms at least as protective of the Confidential
Information as this Agreement. The obligation of confidentiality set forth herein shall not apply to information which
(a) was publicly available at the time of the disclosure to the receiving Party; (b) subsequently becomes publicly
available through no fault of the receiving Party; (c) is rightfully acquired by the receiving Party from a third party who
is not in breach of a confidential obligation with regard to such information; (d) is independently known by the
receiving party whether prior to or during the Term of this Agreement; or (e) is disclosed with the written consent of
WW.
10.6 Entire Agreement. This Agreement (including the preamble statements and exhibits annexed hereto, all of which
constitute operative provisions of this
13
Agreement) constitutes the entire understanding and agreement between the Parties hereto with respect to the subject
matter hereof, and supersedes all prior oral and written understandings and agreements relating thereto; and may not be
modified, discharged or terminated, nor may any of the provisions hereof be waived, except in a writing signed by all
Parties hereto and exchanged between them. There are no other representations, undertakings, warranties, promises or
consideration made by any Party hereto to the other with respect to the subject matter of this Agreement, except as
expressly specified herein. Any discrepancy between this Agreement and any of the Other Agreements with respect to
the subject matter of this Agreement shall be governed and controlled by this Agreement; provided, however, that any
right relating to OW’s position as a member of the Board of WW shall be governed and controlled by the Other
Agreements and nothing in this Agreement shall prevent OW from enforcing her rights under the Other Agreements as
they relate to this Agreement.
10.7 Severability. If any provision or any portion of any provision of this Agreement or the application thereof to any person
or entity or circumstance shall be held void, invalid, illegal or unenforceable to any extent, the remainder of this
Agreement and the application thereof shall not be affected and shall continue in full force and effect.
10.8 Interpretation. In this Agreement, unless otherwise specified or where the context otherwise requires:
10.8.1. the headings in this Agreement are inserted for convenience only and are in no way intended to describe,
interpret, define, or limit the scope, extent or intent of this Agreement or any provision hereof;
10.8.2. the words “include,” “includes” or “including” shall be deemed to be followed by the words “without
limitation”;
10.8.3. the words “hereof,” “herein,” “hereunder” and “herewith” and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement;
and
10.8.4. as between OW and WW, the Parties hereto have participated jointly in the negotiation and drafting of this
Agreement, and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties hereto, and no presumption or burden of proof shall arise favoring
or disfavoring any party hereto by virtue of the authorship of any provisions of this Agreement.
10.9 No Third Party Beneficiaries. Except as specifically provided herein, there are no third party beneficiaries to this
Agreement.
14
10.10 All Approvals In Writing by OW and WW. Notwithstanding anything to the contrary contained herein, all approvals to
be given by OW and WW, respectively, hereunder shall only be deemed given if given in writing, irrespective of
whether so expressly stated as required hereunder.
10.11 No Election of Remedies. As between OW and WW, either Party’s failure in any one or more instances to insist upon
strict performance of any of the terms and conditions of this Agreement or to exercise any right herein conferred shall
not be construed as a waiver or relinquishment of that right or of that party’s right to assert or rely upon the terms and
conditions of this Agreement, nor an election of available remedies. Any express waiver of a term of this Agreement
shall not be binding and effective unless made in writing and properly executed by the waiving party. As between OW
and WW, each Party reserves the right to seek all remedies, in law or equity, available to it as a result of the material
uncured breach of this Agreement by the other Party.
10.12 Survival. All provisions herein, which by their nature, would address matters that might arise at a date subsequent to the
expiration or termination of this Agreement, shall survive such expiration or termination.
10.13 Non-Solicitation. Each of WW, on the one hand, and OW, on the other hand, agree that during the Term and for a
period of one (1) year thereafter, it will not directly or indirectly, for itself or for the benefit of others, solicit any key
employee of the other to terminate his or her employment or hire any key employee of the other for a period of one
(1) year following the termination of said employee’s employment.
10.14 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be regarded for all
purposes as an original, and such counterparts shall constitute a single document. The parties may also exchange
signatures (in counterparts) by facsimile or e-mail transmission, which signatures are deemed to be original, valid and
binding (once fully executed and exchanged).
[Signature Page Follows]
15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
WEIGHT WATCHERS INTERNATIONAL INC.
By: /s/ James R. Chambers
Name: James R. Chambers
Title: Chief Executive Officer
OPRAH WINFREY
By: /s/ Oprah Winfrey
Name: Oprah Winfrey
16
Exhibit A
WW Marks
WEIGHT WATCHERS and such other related trademarks and service marks as may be authorized by WW.
17
Exhibit B
Oprah Marks
OPRAH, OPRAH WINFREY and such other related trademarks and service marks as may be authorized by OW.
18
EXHIBIT 21.1
List of Subsidiaries of Weight Watchers International, Inc.
BLTC Pty Limited, incorporated in Australia
Fortuity Pty Ltd, incorporated in Australia
Gutbusters Pty Ltd., incorporated in Australia
LLTC Pty Limited, incorporated in Australia
Millhill Enterprises Pty Ltd, incorporated in Australia
Weight Watchers Asia Pacific Finance Limited Partnership II, incorporated in Australia
Weight Watchers Australia Holdings Pty Ltd., incorporated in Australia
Weight Watchers International Pty. Ltd, incorporated in Australia
Weight Watchers Services Pty Ltd, incorporated in Australia
Weight Watchers Belgium N.V., incorporated in Belgium
Weight Watchers Botswana Pty Ltd, incorporated in Botswana
Vigilantes do Peso Marketing Ltda, incorporated in Brazil
Weight Watchers do Brasil Programas Alimentares Ltda, incorporated in Brazil
Weight Watchers Canada, Ltd., incorporated in Canada
Weight Watchers Asia Holdings Ltd., incorporated in Cayman Islands
Weight Watchers (China) Weight Loss Consultation Co., Ltd., incorporated in the People’s
Republic of China
Weight Watchers de Colombia Ltda., incorporated in Columbia
QHC, LLC, incorporated in Delaware
Waist Watchers, Inc., incorporated in Delaware
Weight Watchers Direct, Inc., incorporated in Delaware
Weight Watchers North America, Inc., incorporated in Delaware
W. W. Camps and Spas, Inc., incorporated in Delaware
WW Fitness, Inc., incorporated in Delaware
WW Foods, LLC, incorporated in Delaware
WW Funding Corp., incorporated in Delaware
W.W. Inventory Service Corp., incorporated in Delaware
W.W.I. Subsidiary, Inc., incorporated in Delaware
WeightWatchers.ca Limited, incorporated in Delaware
WeightWatchers.com, Inc., incorporated in Delaware
WeightWatchers.fr S.A.R.L., incorporated in France
Weight Watchers France SAS, incorporated in France
Weight Watchers Operations France SAS, incorporated in France
Weight Watchers At Work GmbH, incorporated in Germany
Weight Watchers (Deutschland) GmbH, incorporated in Germany
Great Day Holdings Limited, incorporated in Hong Kong
Weight Watchers China Limited, incorporated in Hong Kong
Il Salvalinea, S.R.L., incorporated in Italy
Centro de Cuidado Del Peso, S. de R.L. de C.V., incorporated in Mexico
Servicios Operativos CP, S. de R.L. de C.V., incorporated in Mexico
Weight Watchers Vigilantes de Peso de Mexico, S.A. de C.V., incorporated in Mexico
Stichting Gezond Gewicht, Gezond Leven, incorporated in Netherlands
Weight Watchers Netherlands, B.V., incorporated in Netherlands
WeightWatchers.nl B.V., incorporated in Netherlands
58 WW Food Corp., incorporated in New York
Weight Watchers Camps, Inc., incorporated in New York
Weight Watchers Foundation, Inc., incorporated in New York
W.W.I. European Services, Ltd., incorporated in New York
W.W. Weight Reduction Services, Inc., incorporated in New York
W/W TwentyFirst Corporation, incorporated in New York
Weight Watchers Limited, incorporated in New Zealand
Weight Watchers New Zealand Limited, incorporated in New Zealand
Weight Watchers New Zealand Unit Trust, incorporated in New Zealand
Weight Watchers Polska Spz.o.o., incorporated in Poland
Weight Watchers (Lesotho) Pty, incorporated in South Africa
Weight Watchers Operations Spain S.L., incorporated in Spain
Weight Watchers Spain S.L., incorporated in Spain
Weight Watchers European Holding AB, incorporated in Sweden
Weight Watchers Sweden ViktVaktarna Akiebolag, incorporated in Sweden
Weight Watchers (Switzerland) SA, incorporated in Switzerland
Weight Watchers (Accessories & Publications) Ltd., incorporated in United Kingdom
Weight Watchers (Exercise) Ltd., incorporated in United Kingdom
Weight Watchers Supply Company Limited, incorporated in United Kingdom
Weight Watchers International Holdings Ltd., incorporated in United Kingdom
Weight Watchers UK Holdings Ltd., incorporated in United Kingdom
Weight Watchers (U.K.) Limited, incorporated in United Kingdom
WeightWatchers.co.uk Limited, incorporated in United Kingdom
WeightWatchers.de Limited, incorporated in United Kingdom
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-
165637, 333-123642, 333-156185, 333-195800, and 333-208067) of Weight Watchers International, Inc. of our
report dated March 2, 2016 relating to the financial statements, financial statement schedule and the effectiveness
of internal control over financial reporting, which appears in this Form 10-K.
Exhibit 23.1
/s/PricewaterhouseCoopers LLP
New York, New York
March 2, 2016
CERTIFICATION
EXHIBIT 31.1
I, James Chambers, certify that:
1. I have reviewed this Annual Report on Form 10-K of Weight Watchers International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s
Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 2, 2016
Signature:
/S/
JAMES CHAMBERS
James Chambers
President, Chief Executive Officer and Director
(Principal Executive Officer)
CERTIFICATION
EXHIBIT 31.2
I, Nicholas P. Hotchkin, certify that:
1. I have reviewed this Annual Report on Form 10-K of Weight Watchers International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s
Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 2, 2016
Signature:
/S/ NICHOLAS P. HOTCHKIN
Nicholas P. Hotchkin
Chief Financial Officer
(Principal Financial and Accounting Officer)
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002
In connection with the Annual Report on Form 10-K of Weight Watchers International, Inc. (the
“Company”) for the fiscal year ended January 2, 2016, as filed with the Securities and Exchange Commission on
the date hereof (the “Report”), we, the undersigned officers of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: March 2, 2016
Signature:
/s/
JAMES CHAMBERS
James Chambers
President, Chief Executive Officer and Director
(Principal Executive Officer)
Signature:
/S/ NICHOLAS P. HOTCHKIN
Nicholas P. Hotchkin
Chief Financial Officer
(Principal Financial and Accounting Officer)