NEW YORK - Aug. 1, 2013 // PRNewswire // - Weight Watchers International, Inc. (NYSE: WTW) today announced its results for the second quarter of fiscal 2013 and revised its fiscal 2013 earnings guidance. Second quarter 2013 results include:
"Current business conditions are challenging," commented Jim Chambers, the Company's newly appointed CEO. "As an offset, we are making good progress with our cost savings agenda. We know there's much more to be done to improve overall business performance. While I'm excited about the team's plans for the January 2014 campaign, the 2013 recruitment weakness means that we'll start 2014 with fewer active members and therefore a lower earnings base."
Chambers added, "That said, I believe in our strategic potential and I am confident that we have the building blocks in place to enable a meaningful transformation over the next few years."
Second quarter 2013 net income was $64.9 million versus $77.5 million in the prior year period. Earnings per fully diluted share (EPS) for Q2 2013 were $1.15 versus $1.36 in the prior year period.
Net income and EPS for Q2 2013 were impacted by the write-off of fees associated with the Company's recently reported debt refinancing in April 2013. This write-off resulted in a $21.7 million ($13.3 million after tax), or $0.24 per fully diluted share, early extinguishment of debt charge recorded in the second quarter of fiscal 2013. Excluding this early extinguishment of debt charge (after tax), net income was $78.3 million and EPS was $1.39 in Q2 2013. Foreign currency had a de minimis impact on EPS in Q2 2013.
Second quarter 2013 revenues decreased 3.9% on a constant currency basis versus the prior year period, resulting from lower revenues in the meetings business as it experienced weaker volumes globally, most notably in North America and the UK.
Q2 2013 total paid weeks were down 2.5% as compared to the prior year period. Online paid weeks increased 4.4% versus the prior year period, while meeting paid weeks declined 10.4% versus the prior year period.
Q2 2013 operating income increased 0.3% on a constant currency basis versus the prior year period. This increase in operating income was driven by lower marketing expense, primarily in the United States from the elimination of inefficient digital advertising and lack of a men's campaign in Q2 2013.
Second quarter 2013 meeting revenues for the North American meetings business (NACO) were down 7.3% on a constant currency basis versus the prior year period driven by lower enrollment volumes. Q2 2013 meeting paid weeks and attendance decreased 10.0% and 14.5%, respectively, versus the prior year period.
The Company completed three franchise acquisitions in the second half of fiscal 2012 (September through December 2012) as well as a fourth franchise acquisition in March 2013. Franchise acquisitions benefitted NACO meeting revenues by approximately 2.2% in the second quarter of 2013.
Second quarter 2013 International meeting revenues were down 8.6% on a constant currency basis versus the prior year period, primarily driven by lower revenues in the United Kingdom (UK).
Second quarter 2013 Internet revenues grew 6.6% on a constant currency basis versus the prior year period. This growth in Internet revenues was a deceleration from the period-over-period increase of 10.9% experienced in Q1 2013. This deceleration was driven by declining sign-ups in the US business which continued through the quarter, as the commercial weight loss category continued to be impacted by increasing consumer trial of activity monitors and free apps. Sign-up performance in our Continental European market remained strong in Q2 2013. Online paid weeks were up 4.4%, and end of period active Online subscribers were up 1.4%, versus Q2 2012.
First half fiscal 2013 net income was $113.7 million versus $132.1 million in the prior year period. EPS for the first half of fiscal 2013 was $2.02 versus $2.01 in the prior year period.
Net income and EPS for the first half 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 the second quarter of fiscal 2013 resulting from the Company's previously announced recent debt refinancing. Excluding this early extinguishment of debt charge (after tax), net income was$127.0 million and EPS was $2.26 in Q2 2013.
EPS in the first half of fiscal 2013 continued to benefit from the completion of the Company's previously disclosed tender offer and related stock repurchase transaction that took place in March and April 2012, respectively. Foreign currency did not have a significant impact on EPS in the first half of fiscal 2013.
First half 2013 revenues decreased 3.5% on a constant currency basis versus the prior year period. This decrease resulted from lower revenues in the meetings business as it experienced weaker volumes globally, most notably in North America and the UK. This decline in meetings business revenues was partially offset by revenue growth in the WeightWatchers.com business.
First half 2013 total paid weeks were down 0.6% as compared to the prior year period. Online paid weeks increased 7.3% versus the prior year period, while meeting paid weeks declined 9.3% versus the prior year period.
First half 2013 operating income increased 0.6% on a constant currency basis versus the prior year period. The increase in operating income was driven by lower marketing expense, primarily in the United States from the elimination of inefficient digital advertising and the lack of a men's campaign in the first half 2013.
The Company has revised its full year 2013 earnings guidance to a range of between $3.55 and $3.70 per fully diluted share as compared to its previously provided range of between $3.60 and $3.90 per fully diluted share. This revised earnings guidance range excludes the one-time, second quarter charge of $0.24 per fully diluted share related to the early extinguishment of debt associated with the Company's recent debt refinancing.
The Company has scheduled a conference call today at 5:00 p.m. ET. During the conference call, Jim Chambers, President and Chief Executive Officer of the Company, and Nick Hotchkin, Chief Financial Officer of the Company, will discuss second quarter 2013 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.
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 and earnings per fully diluted share with respect to the second quarter and first half of fiscal 2013 are discussed in this release both as reported (on a GAAP basis) and as adjusted (on a non-GAAP basis) to exclude the impact from the early extinguishment of debt charge associated with the Company's previously reported debt refinancing. 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 40,000 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 provider of these products 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 or impede people from gathering with others or accessing resources; 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
Investor Relations
(212) 589-2713
Brainerd Communicators, Inc.
Corey Kinger
(212) 986-6667
SOURCE Weight Watchers International, Inc.
WW (formerly Weight Watchers) is a global wellness company, we inspire millions of people to adopt healthy habits for real life.