NEW YORK - Feb. 13, 2014 // PRNewswire // - Weight Watchers International, Inc. (NYSE: WTW) today announced its results for the fourth quarter and full year of fiscal 2013 and provided full year fiscal 2014 earnings guidance. Full year and fourth quarter 2013 results include:
"In Q4, we performed in line with our expectations," commented Jim Chambers, the Company's President and Chief Executive Officer. Chambers added, "While we are confident that we are on the right track to execute a successful transformation, 2014 will be a very challenging year as reflected in our 2014 EPS guidance of $1.30 to $1.60."
Q4 2013 Consolidated Summary
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See "Reconciliation of Non-GAAP Financial Measures" attached to this release for further detail on adjustments to GAAP financial measures.
Fourth quarter 2013 net income was $30.8 million versus $58.0 million in the prior year period. EPS for Q4 2013 was $0.54, which included $0.04 of expense in connection with the shutdown of our China business, versus $1.03 in the prior year period. Foreign currency had a de minimis impact on EPS in the fourth quarter 2013.
Net income and EPS for Q4 2012 were impacted by a previously reported item that affected 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. Excluding this net benefit (after-tax) associated with the settlement, net income was $53.9 million and EPS was $0.96 in Q4 2012.
Q4 2013 Global Results
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Fourth quarter 2013 revenues decreased 11.1% on a constant currency basis versus the prior year period. Q4 2013 total paid weeks were down 8.5% as compared to the prior year period. Online paid weeks declined 6.5%, and meeting paid weeks declined 10.9%, versus the prior year period. These declines were driven by the lower active base at the start of the quarter and lower recruitments in both our businesses versus the prior year period.
Fourth quarter 2013 operating income decreased 35.3% on a constant currency basis versus the prior year period. Excluding the Q4 2012 $14.5 million over-accrual reversal benefit associated with the settlement of the UK self-employment tax litigation, Q4 2013 operating income decreased 26.6% on a constant currency basis versus the prior year period. This decrease was primarily driven by lower revenues in the meetings business. In addition, in Q4 2013, lower marketing expense was almost fully offset by higher general and administrative costs, driven by a number of one-time costs, including costs relating to the shutdown of our China business.
Q4 2013 NACO Performance
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Fourth quarter 2013 meeting revenues for the North American meetings business (NACO) were down 15.0% on a constant currency basis versus the prior year period driven by a lower active base at the start of the quarter and lower enrollments. Q4 2013 meeting paid weeks and attendance decreased 10.8% and 13.1%, respectively, versus the prior year period. Franchise acquisitions benefited NACO meeting revenues by approximately 2.7% in the fourth quarter of 2013.
Q4 2013 International Performance
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Fourth quarter 2013 International meeting revenues were down 11.4% on a constant currency basis versus the prior year period, primarily driven by lower revenues in theUnited Kingdom (UK).
Q4 2013 WeightWatchers.com Performance
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Fourth quarter 2013 Internet revenues declined 5.3% on a constant currency basis versus the prior year period. This decline in Internet revenues was a deceleration from the growth of 0.9%, 6.6% and 10.9% experienced in Q3, Q2 and Q1 2013 versus the respective prior year periods. This deceleration was driven primarily 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. Online paid weeks declined 6.5%, and end of period active Online subscribers declined 6.7%, versus Q4 2012.
Full Year 2013 Summary
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Full year fiscal 2013 net income was $204.7 million versus $257.4 million in the prior year. EPS for the full year of fiscal 2013 was $3.63 versus $4.23 in the prior year.
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 the second quarter resulting from the write-off of fees associated with the Company's April 2013 debt refinancing. Excluding this early extinguishment of debt charge (after tax), net income would have been $218.1 million and EPS would have been $3.87 for the full year of fiscal 2013.
EPS in the full year 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 had a de minimis impact on EPS for the full year of fiscal 2013.
Full Year 2013 Global Results
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See "Reconciliation of Non-GAAP Financial Measures" attached to this release for further detail on adjustments to GAAP financial measures.
Full year fiscal 2013 revenues decreased 6.2% on a constant currency basis versus the prior year. 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 modest revenue growth in the WeightWatchers.com business.
Full year fiscal 2013 total paid weeks were down 3.9% as compared to the prior year. Online paid weeks increased 1.7% versus the prior year, while meeting paid weeks declined 10.1% versus the prior year.
Full year fiscal 2013 operating income decreased 9.7% 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 fiscal 2013 decreased by 7.0% on a constant currency basis versus the prior year. Lower marketing expense, primarily from the elimination of inefficient digital advertising and the absence of a men's campaign in the United States, partially offset lower revenues in the meetings business.
The Company provided full year 2014 earnings guidance of between $1.30 and $1.60 per fully diluted share. This guidance incorporates the fact that fiscal 2014 includes a 53rd week, which bridges the last week of December 2014 and the first week of January 2015 and has an expected negative $0.04 impact on the full year EPS. During the first quarter of fiscal 2014, the Company intends to finalize plans to resize its organization. The costs associated with this plan are not included in the above earnings guidance.
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 fourth quarter and full year 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.
Statement regarding Non-GAAP Financial Measures
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. Net income and earnings per fully diluted share with respect to the full year 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. 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 of the accrual reversal associated with the settlement of the Company's previously reported UK self-employment tax litigation. Earnings before interest, taxes, depreciation, amortization and stock-based compensation (EBITDAS) is presented in the attachments to this release. 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).
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Corey Kinger
Brainerd Communicators, Inc.
(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.