Global weight control company Weight Watchers International has announced its Q4 and FY results ended 29 December 2001.

In summarizing the year's results, President and CEO Linda Huett cited a number of operational accomplishments that contributed to the company's revenue and earnings growth: "I am very pleased with our success in increasing market penetration, introducing innovative new products, and intelligently expanding the offerings under our valuable Weight Watchers brand.

"We continue to strengthen our position as the leader in our industry."

During the full year, the company acquired and successfully integrated Weighco Enterprises, one of its two largest franchisees. It also increased worldwide attendance at company-owned meetings by 17.1%, to 47 million from 40.1 million in 2000.

Pro forma annual revenues increased by 27.8%, driven by both attendance and product sales growth. Pro forma operating margins meanwhile increased to 31.2% of revenues from 25.7% in 2000. The company also successfully completed its IPO and listed its shares on the New York Stock Exchange. 

Financial Results

For the fiscal 2001 Q4, the company had net revenues of US$145.5m and net income of US$81.4m, or US$0.75 per diluted share, including the reversal of a US$71.9m income tax valuation allowance that had been set up concurrent with Heinz's September 1999 sale of the company.

Excluding the impact of this reversal on the provision for income taxes, Q4 net income was US$9.5m, or US$0.09 per diluted share. The Q4 results include a US$1.8m after-tax (US$0.02 per diluted share) foreign currency translation gain, net of hedges, related to the company's €-denominated debt. Due to the company's change in fiscal year to a December year-end, there is no comparable Q4 available for the prior year. However, the company's results compare favorably with the analysts' consensus Q4 net income estimate of US$0.04 per diluted share.

Net revenues for the FY were US$623.9m, a 42% increase compared with US$439.4m year on year. Pro forma for the Weighco acquisition, net revenues grew 27.8% from US$488.2m in the prior year. Pro forma 2000 results assume Weight Watchers owned Weighco for all of 2000, rather than since the actual acquisition date of 16 January 2001. Net income for the latest FY was US$145.8m, or US$1.31 per diluted share. Excluding the US$71.9m reversal of an income tax valuation allowance, net income was US$73.8m, or US$0.67 per diluted share.

Huett continued: "The Q4 capped another great year for Weight Watchers. During 2001 we achieved record worldwide attendance. At the same time our continuous focus on both our operating efficiencies and marketing effectiveness helped drive margin expansion. While our initial public offering could have diverted our attention, the entire Weight Watchers team stayed focused on what drives our business-serving our members-enabling us to finish the year on a high note."

2002 Accounting Changes

The company recorded US$9.8m of pre-tax or US$6.4m of after-tax (US$0.06 per diluted share) goodwill amortization expense in 2001. Beginning in January 2002, the company adopted the Financial Accounting Standards Board (FASB) Statement No. 142, "Goodwill and Other Intangible Assets." Under this statement, goodwill and indefinite lived intangible assets will no longer be amortized but will be subject to annual impairment tests in accordance with the new standard.