NEW YORK - Feb. 26, 2015 // PRNewswire // - Weight Watchers International, Inc. (NYSE: WTW) today announced its results for the fourth quarter and full year fiscal 2014 and provided full year fiscal 2015 earnings guidance, including:
"While we still believe in our underlying strategies, I am disappointed that we are not yet where we hoped to be and our turnaround will take longer than we had anticipated," commented Jim Chambers, the Company's President and Chief Executive Officer. "Therefore, as we continue to enhance our consumer offerings, we are taking more aggressive steps to right-size our cost structure with a $100 million cost-savings initiative."
Q4 2014 Consolidated Summary
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Fourth quarter 2014 net loss was $16.1 million versus net income of $30.8 million in the prior year period. EPS for Q4 2014 was a loss of $0.28 versus income of $0.54 in the prior year period. Foreign currency had a de minimis impact to EPS in Q4 2014.
Net income and EPS for Q4 2014 were negatively impacted by two items that affected year-over-year comparability. First, the Company incurred $1.0 million ($0.6 million after tax or $0.01 per fully diluted share) of charges in connection with its previously disclosed 2014 restructuring plan. Second, the Company recorded an impairment charge of $26.1 million ($19.1 million after tax or $0.34 per fully diluted share) for its franchise rights acquired related to its Canada operations. Excluding these two items, net income was $3.7 million and EPS was $0.07 in Q4 2014.
Net income and EPS for Q4 2013 were negatively impacted by an impairment charge of $1.2 million ($0.02 per fully diluted share) for its franchise rights acquired related to its Mexico and Hong Kong operations. Excluding this item, net income was $32.0 million and EPS was $0.56 in Q4 2013.
Q4 2014 Global Results
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Fourth quarter 2014 revenues decreased 7.9% on a constant currency basis versus the prior year period. This decrease was primarily driven by lower revenues in North America. Q4 2014 total paid weeks were down 7.0% as compared to the prior year period, with an Online paid weeks decline of 7.2% and meeting paid weeks decline of 6.8%. These declines were driven by lower active subscriber bases at the start of the quarter and lower recruitments in the quarter for both the meetings and Online businesses versus the prior year period.
Fourth quarter 2014 operating income decreased 82.4% on a constant currency basis versus the prior year period. Excluding the $1.0 million of restructuring charges and $26.1 million impairment charge in Q4 2014 and excluding the $1.2 million impairment charge in Q4 2013, operating income decreased 46.2% on a constant currency basis versus the prior year period. The operating income decline was driven primarily by lower revenues and higher marketing expense in North America.
Fourth quarter 2014 had 14 weeks as compared to 13 weeks in the fourth quarter 2013, which had a negative impact of $0.05 per fully diluted share.
Q4 2014 North America Performance
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Fourth quarter 2014 service revenues for North America were down 12.7% on a constant currency basis versus the prior year period driven by a 12.8% decline in total paid weeks. These declines were driven by lower active subscriber bases at the start of the quarter and lower recruitments in the quarter for both the meetings and Online businesses versus the prior year period. As was the case throughout 2014, North Americacontinued to face strong competition for consumer trial from an evolving competitor set, including mobile apps and activity monitors, during the fourth quarter 2014.
Q4 2014 UK Performance
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Fourth quarter 2014 service revenues for the UK were down 2.6% on a constant currency basis versus the prior year period driven by lower active subscriber bases at the start of the quarter for both the meetings and Online businesses as compared to the prior year period.
Q4 2014 CE Performance
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Fourth quarter 2014 service revenues for Continental Europe (CE) were up 3.3% on a constant currency basis versus the prior year period. Total paid weeks increased by 8.3%, driven by a 13.0% increase in Online paid weeks. Service revenues were positively impacted by a 0.7% paid weeks increase in the meetings business. The increase in total paid weeks was primarily driven by the higher Online active subscriber base at the start of the quarter and increased Online recruitments compared to the prior year period, which more than offset a lower meeting active subscriber base at the start of the quarter and lower meeting recruitments compared to the prior year period.
Full Year 2014 Consolidated Summary
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Fiscal 2014 net income was $97.4 million versus $204.7 million in the prior year. EPS for fiscal 2014 was $1.72 versus $3.63 in the prior year. Foreign currency had a de minimis impact to EPS in fiscal 2014.
Net income and EPS for fiscal 2014 included: (i) $11.8 million ($7.2 million after tax or $0.13 per fully diluted share) of restructuring charges; (ii) a $26.1 million ($19.1 after tax or $0.34 per fully diluted share) impairment charge; (iii) the impact of the gain of $10.5 million ($6.4 million after tax or $0.11 per fully diluted share) recognized in connection with the Company's previously disclosed Brazil acquisition due to an adjustment of its previously held equity interest to fair value offset by a charge associated with the settlement of the royalty-free arrangement of its Brazilian partnership; and (iv) the $2.4 million net tax benefit ($0.04 per fully diluted share) related to an intercompany loan write-off in connection with the Company's previously disclosed closure of its 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. Excluding the impact of the above items, net income was $115.0 million and EPS was $2.03 in fiscal 2014.
Net income and EPS for fiscal 2013 were impacted by two items that affected year-over-year comparability. First, the Company wrote-off fees associated with the Company's 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 fiscal 2013. Second, the Company recorded an impairment charge of $1.2 million ($0.02per fully diluted share) for its franchise rights acquired related to its Mexico and Hong Kong operations. Excluding these items, net income was $219.2 million and EPS was $3.89 in fiscal 2013.
Full Year 2014 Global Results
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Fiscal 2014 revenues decreased 14.2% on a constant currency basis versus the prior year. This decrease was primarily driven by lower revenues in North America. Fiscal 2014 total paid weeks were down 12.2% as compared to the prior year, with an Online paid weeks decline of 12.2% and meeting paid weeks decline of 12.3%. These declines were driven by lower active subscriber bases at the start of the year and lower recruitments in the year for both the meetings and Online businesses versus the prior year.
Fiscal 2014 operating income decreased 41.7% on a constant currency basis versus the prior year. Excluding the fiscal 2014 $11.8 million of restructuring charges and $26.1 million impairment charge and the fiscal 2013 $1.2 million impairment charge, fiscal 2014 operating income decreased 33.2% on a constant currency basis versus the prior year. The operating income decline was driven primarily by lower revenues in North America.
Fiscal 2014 had 53 weeks as compared to 52 weeks in fiscal 2013, which had a negative impact of $0.05 per fully diluted share.
The Company provided full year 2015 earnings guidance of between $0.40 and $0.70 per fully diluted share. During the first quarter of fiscal 2015, 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, and Nick Hotchkin, Chief Financial Officer, will discuss fourth quarter and full year 2014 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. Net income, earnings per fully diluted share and operating income with respect to the fourth quarter and full year of fiscal 2014 and fiscal 2013 are discussed in this release both as reported (on a GAAP basis) and as adjusted (on a non-GAAP basis), as applicable, as follows: (i) with respect to the fourth quarter and full year fiscal 2014, to exclude the impact of charges associated with the Company's previously disclosed 2014 restructuring of its organization and the impact of the impairment charge for its franchise rights acquired related to its Canada operations; (ii) with respect to the full year fiscal 2014, to exclude the net tax benefit related to an intercompany loan write-off in connection with the previously disclosed closure of the Company's 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 and the impact of the gain on the Company's previously disclosed Brazil acquisition; (iii) with respect to the fourth quarter fiscal 2013, to exclude the impact of the impairment charge for its franchise rights acquired related to its Mexico and Hong Kong operations; and (iv) with respect to the full year fiscal 2013, to exclude the impact from the early extinguishment of debt charge associated with the Company's previously reported debt refinancing and the impact of the impairment charge for its franchise rights acquired related to its Mexico and Hong Kong operations. 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 more than 40,000 meetings each week where members receive group support and learn about healthy eating patterns, behavior modification and physical activity. Weight Watchers provides innovative, digital weight management products through its websites, mobile sites and apps. Weight Watchers is the leading provider of digital weight management 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, or the Company's ability to successfully expand into new channels of distribution; the ability to successfully implement new strategic initiatives; 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; the impact of the Company's debt service obligations and restrictive debt covenants; uncertainties regarding the satisfactory operation of the Company's information technology or systems; the recognition of asset impairment charges; 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; 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 possibility that the interests of the Company's majority owner will conflict with other holders of its 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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SOURCE Weight Watchers International, Inc.
Corey Kinger
Brainerd Communicators, Inc.
(212) 986-6667
kinger@braincomm.com
WW (formerly Weight Watchers) is a global wellness company, we inspire millions of people to adopt healthy habits for real life.