NEW YORK, Feb. 13, 2013 // PRNewswire // -- Weight Watchers International, Inc. (NYSE: WTW) today announced its fiscal 2012 results for the fourth quarter and full year and provided full year fiscal 2013 earnings guidance.
Fourth quarter 2012 highlights include:
"While 2012 set a Company record for combined global meetings members and global Weight Watchers Online subscribers, we have been disappointed by our recruitment trends thus far in 2013," commented David Kirchhoff, Chief Executive Officer of the Company. "Our current marketing has not been as effective in this tough economic and increasingly competitive environment. In this context, we are taking appropriate steps to address these near-term challenges while continuing to pursue our long-term growth strategies. We are providing a 2013 full-year guidance range of $3.50 to $4.00 per fully diluted share."
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Fourth quarter 2012 net income was $58.0 million versus $63.7 million in the prior year period. Earnings per fully diluted share (EPS) for Q4 2012 were $1.03 versus $0.86 in the prior year period.
Net income and EPS for Q4 2012 were impacted by certain items which affect year-over-year comparability. In the fourth quarter of fiscal 2012, the Company recognized a $4.1 million net benefit ($7.4 million pre-tax), or $0.07 per fully diluted share, from an accrual reversal associated with the settlement in the quarter of the previously reported UK self-employment tax litigation. The $7.4 million pre-tax net benefit associated with the settlement consisted of an over-accrual reversal to cost of revenues of $14.5 million partially offset by an additional interest accrual of$7.1 million. Excluding this net benefit (after-tax) associated with the settlement, net income was $53.9 million and EPS was $0.96 in Q4 2012.
In addition, as in Q2 and Q3 2012, Q4 2012 EPS benefited from the completion of the Company's previously disclosed tender offer and related stock repurchase transaction. Foreign currency did not have a significant impact on EPS in Q4 2012.
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Fourth quarter 2012 revenues increased 1.7% on a constant currency basis versus the prior year period, as the Company continued to benefit from strong growth globally in the WeightWatchers.com business. This growth in the WeightWatchers.com business was mostly offset by lower revenues in the meetings business as the Company experienced weaker volumes in North America and the UK.
Q4 2012 total paid weeks were up 4.5% as compared to the prior year period, on top of the 30.7% growth reported in Q4 2011 versus Q4 2010. Online paid weeks increased 18.0% versus the prior year period, on top of the 58.8% growth experienced in Q4 2011 versus Q4 2010. Meeting paid weeks decreased 7.9% versus the prior year period and attendance decreased 14.4% versus the prior year period.
Q4 2012 operating income increased 4.6% on a constant currency basis versus the prior year period. Excluding the $14.5 million over-accrual reversal benefit associated with the settlement of the UK self-employment tax litigation, Q4 2012 operating income decreased 7.4% on a constant currency basis versus the prior year period. Similar to the first nine months of fiscal 2012, gross margin expansion from the higher-margin WeightWatchers.com business was partially offset by gross margin contraction in the meetings business due to expenses associated with our retail initiative in North America, one-time costs associated with the transition to a new customer service provider in North America, and softer volumes. Gains in gross margin were more than offset by higher general and administrative and marketing expenses in Q4 2012 versus the prior year period due to increased investments in strategic initiatives and higher medical benefits expense, as well as higher advertising and marketing expense for the North American meetings business.
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Fourth quarter 2012 meeting revenues for the North American meetings business (NACO) were down 1.9% on a constant currency basis versus the prior year period, as a result of continued lower enrollment volumes and continued weakness in the traditional meetings business. As a result, Q4 2012 meeting paid weeks and attendance decreased 7.3% and 14.5%, respectively, versus the prior year period.
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Similar to the second and third quarters of fiscal 2012, Q4 2012 International meeting revenues were down 4.5% on a constant currency basis versus the prior year period, with growth in Continental Europe (CE) continuing to be more than offset by declines in the United Kingdom (UK).
Q4 2012 WeightWatchers.com Performance
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The WeightWatchers.com business continued to deliver strong growth in the fourth quarter of fiscal 2012, with Internet revenues up 17.7% on a constant currency basis versus the prior year period. Online paid weeks were up 18.0%, and end of period active Online subscribers were up 18.0%, versus Q4 2011. Performance was strong across most markets, with strong double-digit Online paid weeks growth in the North American and Continental European markets.
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Full year fiscal 2012 net income was $257.4 million versus $304.9 million in the prior year. Excluding the net benefit associated with the settlement in Q4 2012 of the UK self-employment tax litigation, net income in the full year of fiscal 2012 was $253.3 million. The decrease in the Company's year-over-year performance for the full year of fiscal 2012 was primarily the result of lower sales in the meetings business and higher interest expense offset, in part, by growth in the WeightWatchers.com business.
EPS for the full year of fiscal 2012 was $4.23 versus $4.11 in the prior year. Excluding the net benefit associated with the Q4 2012 settlement of the UK self-employment tax litigation, EPS for the full year of fiscal 2012 was $4.16, an increase of 1.1% versus the prior year. Full year 2012 EPS benefited from the completion of the Company's tender offer and related stock repurchase transaction. These transactions, as previously disclosed, resulted in the repurchase of 18,279,289 shares in the aggregate of the Company's common stock for approximately $1.5 billion in the aggregate. Foreign currency negatively impacted full year 2012 EPS by approximately $0.07 per fully diluted share.
Full Year 2012 Global Results
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Full year 2012 revenues increased 1.8% on a constant currency basis versus the prior year as the Company continued to benefit from strong global growth in the WeightWatchers.com business. This growth in the WeightWatchers.com business was in large part offset by lower sales in the meetings business as the Company experienced weaker volumes particularly in North America and the UK.
Full year 2012 total paid weeks were up 9.3% as compared to the prior year, on top of the 37.3% growth reported for the full year 2011 versus the full year 2010. Full year 2012 meeting paid weeks and attendance decreased 5.4% and 11.0%, respectively, versus the prior year. Online paid weeks for the full year 2012 increased 26.7% versus the prior year, on top of the 67.6% growth reported for the full year 2011 versus the full year 2010.
Full year 2012 operating income decreased 5.3% on a constant currency basis versus the prior year. Excluding the $14.5 million over-accrual reversal benefit associated with the settlement in Q4 2012 of the UK self-employment tax litigation, operating income for the full year 2012 decreased by 7.9% on a constant currency basis versus the prior year. This decline was driven by a combination of volume weakness in the meetings business and higher marketing expense and general and administrative expense as the Company continued to invest in several growth areas: namely, deploying first-time Online TV campaigns in several countries, marketing Weight Watchers Online to men in the United States, and building capabilities in B2B, retail and technology.
The Company provided full year 2013 earnings guidance of between $3.50 and $4.00 per fully diluted share.
The Company has scheduled a conference call today at 5:00 p.m. ET. During the conference call, David Kirchhoff, Chief Executive Officer of the Company, and Nicholas Hotchkin, Chief Financial Officer of the Company, will discuss fourth quarter and full year 2012 results and answer questions from the investment community. Live audio of the conference call will be simultaneously webcast over the Internet on the Company's corporate website, www.weightwatchersinternational.com. A replay of the webcast will be available on this site for approximately 90 days.
The following provides information regarding non-GAAP financial measures used in this earnings release:
To supplement the Company's consolidated results presented in accordance with accounting principles generally accepted in the United States (GAAP), the Company has disclosed non-GAAP financial measures of operating results that exclude or adjust certain items. Earnings before interest, taxes, depreciation, amortization and stock-based compensation (EBITDAS) is presented in the attachments to this release. Net income, operating income and earnings per fully diluted share with respect to the fourth quarter and full year of fiscal 2012 are discussed in this release both as reported (on a GAAP basis) and as adjusted (on a non-GAAP basis) to exclude the net benefit associated with the settlement of the Company's previously reported UK self-employment tax litigation. In addition, the Company presents certain of its financial results on a constant currency basis in addition to GAAP results. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. In this release and any attachments, the Company calculates constant currency by calculating current-year results using prior-year foreign currency exchange rates.
Management believes these non-GAAP financial measures provide useful supplemental information for its and investors' evaluation of the Company's business performance and are useful for period-over-period comparisons of the performance of the Company's business. While management believes that these financial measures are useful in evaluating the Company's business, this information should be considered as supplemental in nature and should not 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. See "Reconciliation of Non-GAAP Financial Measures" attached to this release and reconciliations, if any, included elsewhere in this release for a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures.
Weight Watchers International, Inc. is the world's leading provider of weight management services, operating globally through a network of Company-owned and franchise operations. Weight Watchers holds over 45,000 meetings each week where members receive group support and learn about healthy eating patterns, behavior modification and physical activity. WeightWatchers.com provides innovative, subscription weight management products over the Internet and is the leading Internet-based weight management provider in the world. In addition, Weight Watchers offers a wide range of products, publications and programs for those interested in weight loss and weight control.
This news release and any attachments include "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, including, in particular, earnings guidance and any statements about the Company's plans, strategies and prospects. The Company generally uses the words "may," "will," "could," "expect," "anticipate," "believe," "estimate," "plan," "intend" and similar expressions in this news release and any attachments to identify forward-looking statements. The Company bases these forward-looking statements on its current views with respect to future events and financial performance. Actual results could differ materially from those projected in the forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things: competition from other weight management industry participants or the development of more effective or more favorably perceived weight management methods; the Company's ability to continue to develop innovative new services and products and enhance its existing services and products, or the failure of its services and products to continue to appeal to the market; the effectiveness of the Company's marketing and advertising programs; the impact on the Weight Watchers brand of actions taken by the Company's franchisees, licensees and suppliers; risks and uncertainties associated with the Company's international operations, including economic, political and social risks and foreign currency risks; the Company's ability to successfully make acquisitions or enter into joint ventures, including its ability to successfully integrate, operate or realize the projected benefits of such businesses; uncertainties related to a downturn in general economic conditions or consumer confidence; the seasonal nature of the Company's business; the impact of events that discourage people from gathering with others; the Company's ability to enforce its intellectual property rights both domestically and internationally, as well as the impact of its involvement in any claims related to intellectual property rights; uncertainties regarding the satisfactory operation of the Company's information technology or systems; the impact of security breaches or privacy concerns; the impact of disputes with the Company's franchise operators; the impact of existing and future laws and regulations; the impact of the Company's debt service obligations and restrictive debt covenants; the possibility that the interests of the Company's majority owner will conflict with the other holders of the Company's common stock; and other risks and uncertainties, including those detailed from time to time in the Company's 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 herein, could cause the Company's results to differ materially from those expressed or suggested in any forward-looking statement. Except as required by law, the Company does 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 news release or to reflect the occurrence of unanticipated events or otherwise. Readers are advised to review the Company's filings with the Securities and Exchange Commission (which are available from the SEC's EDGAR database at www.sec.gov, at various SEC reference facilities in the United States and via the Company's website at www.weightwatchersinternational.com).
Weight Watchers International, Inc.
Lori Scherwin
(212) 589-2713
Investor Relations
Brainerd Communicators, Inc.
Corey Kinger
(212) 986-6667
SOURCE Weight Watchers International, Inc.
PR Newswire (http://s.tt/1zKRI)
WW (formerly Weight Watchers) is a global wellness company, we inspire millions of people to adopt healthy habits for real life.