Weight Watchers Announces First Quarter 2015 Results

NEW YORK - May 5, 2015 // PRNewswire // - Weight Watchers International, Inc. (NYSE: WTW) today announced its results for the first quarter of fiscal 2015 and maintained its full year fiscal 2015 earnings guidance.

  • Q1 2015 revenues were $322.1 million, down 21.3% (16.0% on a constant currency basis) versus the prior year period, with total paid weeks down 18.9%.
  • Q1 2015 earnings per fully diluted share (EPS) was a loss of $0.10; excluding the $0.06 per fully diluted share impact of restructuring charges and the $0.05 per fully diluted share benefit from the early extinguishment of debt, Q1 2015 adjusted EPS was a loss of $0.09.
  • The Company maintained full year fiscal 2015 earnings guidance of between $0.40 and $0.70 per fully diluted share.

"Our first quarter results were in line with our previously shared expectations," commented Jim Chambers, the Company's President and Chief Executive Officer. "We are fully engaged in executing our transformation plan, firmly believe we are pursuing the right strategies, and are confident we can implement them successfully."


Q1 2015 Consolidated Summary

   
         
   

Net (Loss) Income* (in millions)

 

Fully Diluted EPS

   

Three Months Ended

     

Three Months Ended

 
   

April 4,

2015

 

March 29,

 2014

 

%
Change

 

April 4,

2015

 

March 29,

 2014

 

%
Change

Net (Loss) Income / EPS

 

$ (5.4)

 

$ 21.5

 

(125.2)%

 

$ (0.10)

 

$ 0.38

 

(125.1)%

Adjustments

           

  Debt Extinguishment

(2.9)

-

 

(0.05)

-

 

  Restructuring Charges

3.5

2.2

 

0.06

0.04

 

  Gain on Brazil Acquisition

-

(6.4)

 

-

(0.11)

 

Adjusted Net (Loss) Income / EPS

 

$ (4.8)

$ 17.4

(127.7)%

$ (0.09)

$ 0.31

(127.7)%

           
Note: Totals may not sum due to rounding.
See "Reconciliation of Non-GAAP Financial Measures" attached to this release for further detail on adjustments to GAAP financial measures.
*Excluding the financials attached to this release, "Net Income" refers to Net Income attributable to Weight Watchers International, Inc.

First quarter 2015 net loss was $5.4 million versus net income of $21.5 million in the prior year period. EPS for Q1 2015 was a loss of $0.10 versus income of $0.38 in the prior year period. Foreign currency negatively impacted EPS by $0.04 in Q1 2015.

Net loss and EPS for Q1 2015 were impacted by two items that affect year-over-year comparability. First, the Company incurred $5.8 million ($3.5 million after tax or $0.06 per fully diluted share) of charges in connection with its previously disclosed 2015 restructuring plan. Second, the Company recorded a gain on early extinguishment of debt of $4.8 million ($2.9 after tax or $0.05 per fully diluted share) for its previously disclosed debt prepayment in the quarter. Excluding these two items, net loss would have been $4.8 million and EPS would have been a loss of $0.09 in Q1 2015.

Net income and EPS for Q1 2014 were impacted by two items that affect year-over-year comparability. First, 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. Second, the Company incurred $3.7 million ($2.2 million after tax or $0.04 per fully diluted share) of charges in connection with its previously disclosed 2014 restructuring plan. Excluding these two items, net income would have been $17.4 million and EPS would have been $0.31 in Q1 2014.

Q1 2015 Global Results

             
               


(in millions except percentages

and as noted)

 


Three Months Ended

 


 

% Change

 

 

% Change
Adjusted for 
Constant
Currency

 

 

April 4,

2015

 

 

March 29,

2014

Revenues

 

$ 322.1

 

$ 409.4

 

(21.3)%

 

(16.0)%

 

Operating Income

Adjustments

 

$  18.0

 

$  51.1

 

 

(64.7)%

     

(57.1)%

 
               

  Restructuring Charges

$    5.8

 

$ 3.7

 

57.6%

 

57.6%

 

Adjusted Operating Income

$  23.8

 

$ 54.7

 

(56.5)%

 

(49.5)%

 
                 

Total Paid Weeks

 

38.5

 

47.5

 

(18.9)%

 

N/A

 

Meeting(1) Paid Weeks

 

17.2

 

20.4

 

( 15.7)%

 

N/A

 

Online(2) Paid Weeks

 

21.3

 

27.1

 

( 21.4)%

 

N/A

 

End of Period Active Subscribers(3) (in thousands)

 

2,921.8

 

3,645.1

 

(19.8)%

 

N/A

 

Meeting Subscribers (in thousands)

 

1,218.0

 

1,468.3

 

(17.0)%

 

N/A

 

Online Subscribers  (in thousands)

 

1,703.8

 

2,176.8

 

(21.7)%

 

N/A

 
                     

Note: Totals may not sum due to rounding.

See "Reconciliation of Non-GAAP Financial Measures" attached to this release for further detail on adjustments to GAAP financial measures.

(1) "Meetings" refers to monthly commitment plan subscribers, "pay-as-you-go" members, Total Access subscribers and other meeting members.
(2) "Online" refers to Weight Watchers Online, Weight Watchers OnlinePlus, Personal Coaching and other digital subscription products.
(3) "Subscribers" refer to meetings members and Online subscribers who participate in recurring billing programs, such as the Company's monthly commitment plan for its meetings business.

First quarter 2015 revenues decreased 16.0% on a constant currency basis versus the prior year period. This decrease was primarily driven by lower revenues in North America. Q1 2015 total paid weeks were down 18.9% as compared to the prior year period, with an Online paid weeks decline of 21.4% and meeting paid weeks decline of 15.7%. 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.

First quarter 2015 operating income decreased 57.1% on a constant currency basis versus the prior year period. Excluding the 2015 plan restructuring charges of $5.8 million and the 2014 plan restructuring charges of $3.7 million, operating income decreased 49.5% on a constant currency basis versus the prior year period. The operating income decline was driven primarily by lower revenues in North America partially offset by lower marketing and selling, general and administrative expense globally.

Q1 2015 North America Performance

       
   

Three Months Ended

       

(in millions except percentages and as noted)

 

April 4,

2015

 

March 29, 
2014

 

% Change

 

% Change
Adjusted for 
Constant 
Currency

                 

Service Revenues*

 

 $ 169.9

 

$ 216.6

 

(21.6)%

 

(20.8)%

Total Paid Weeks

 

24.1

 

32.2

 

(25.2)%

 

N/A

End of Period Active Subscribers

(in thousands)

 

1,820.2

 

2,425.4

 

(25.0)%

 

N/A

                   

See "Reconciliation of Non-GAAP Financial Measures" attached to this release for further detail on adjustments to GAAP financial measures.
* See Consolidated Statements of Net Income for Service Revenues definition.

First quarter 2015 service revenues for North America were down 20.8% on a constant currency basis versus the prior year period driven by a 25.2% 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.


Q1 2015 UK Performance

           
             



(in millions except percentages and as noted)

 

Three Months Ended

 

 

 

% Change

 

% Change
Adjusted for 
Constant
Currency

April 4,

 2015

 

March 29, 
2014

Service Revenues*

 

 $ 22.6

 

$ 27.7

 

(18.5)%

 

(10.8)%

Total Paid Weeks

 

4.6

 

5.2

 

(12.5)%

 

N/A

End of Period Active Subscribers

(in thousands)

 

333.7

 

404.3

(17.5)%

 

N/A

                   

See "Reconciliation of Non-GAAP Financial Measures" attached to this release for further detail on adjustments to GAAP financial measures.
* See Consolidated Statements of Net Income for Service Revenues definition.

First quarter 2015 service revenues for the UK were down 10.8% on a constant currency basis versus the prior year period 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.

Q1 2015 CE Performance

           
             



(in millions except percentages and as noted)

 

Three Months Ended

 

 

 

% Change

 

% Change 
Adjusted for 
Constant 
Currency

April 4,

 2015

 

March 29, 2014

Service Revenues*

 

 $ 48.0

 

$ 61.5

 

(22.0)%

 

(4.7)%

Total Paid Weeks

 

8.8

 

9.1

 

(3.3)%

 

N/A

End of Period Active Subscribers

(in thousands)

 

699.5

 

738.5

 

(5.3)%

 

N/A

                   

See "Reconciliation of Non-GAAP Financial Measures" attached to this release for further detail on adjustments to GAAP financial measures.
* See Consolidated Statements of Net Income for Service Revenues definition.

First quarter 2015 service revenues for Continental Europe (CE) were down 4.7% on a constant currency basis versus the prior year period driven by a lower active subscriber base in the meetings business at the start of the quarter and lower recruitments in the quarter for both the meetings and Online businesses versus the prior year period.

Full Year Fiscal 2015 Earnings Guidance

The Company maintained its full year fiscal 2015 earnings guidance of between $0.40 and $0.70 per fully diluted share. Excluded from the above earnings guidance are restructuring charges and the one-time gain associated with the early extinguishment of debt.

First Quarter 2015 Conference Call

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 the first quarter 2015 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

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 (loss) income, earnings per fully diluted share and operating income with respect to the first quarters of fiscal 2015 and fiscal 2014 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 first quarters of fiscal 2015 and fiscal 2014, to exclude the impact of charges associated with the Company's previously disclosed restructuring plans of its organization; (ii) with respect to the first quarter of fiscal 2015, to exclude the impact from the gain on early extinguishment of debt associated with the Company's previously reported debt prepayment in the quarter; (iii) with respect to the first quarter of fiscal 2014, to exclude the impact of the gain on the Company's previously disclosed Brazil acquisition. 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.

About Weight Watchers International, Inc.

Weight Watchers International, Inc. is the world's leading commercial provider of weight management services, operating globally through a network of Company-owned and franchise operations. Weight Watchers holds more than 36,000 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 Online subscription 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 or respond to consumer trends; the ability to successfully implement new strategic initiatives; the effectiveness of the Company's marketing and advertising programs and strength of its social media presence; 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; the inability to generate sufficient cash to service all of the Company's debt service obligations; uncertainties regarding the satisfactory operation of the Company's information technology or systems; the recognition of asset impairment charges; the inability to renew certain of the Company's licenses, or the inability to do so on terms that are favorable to the Company; the expiration or early termination by the Company of leases; 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 outcomes of litigation or regulatory actions; the impact of existing and future laws and regulations; the loss of key personnel or failure to effectively manage and motivate the Company's workforce; 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).

This release has wide tables. You may view them here: [http://www.prnewswire.com/news-releases/weight-watchers-announces-first-quarter-2015-results-300078029.html?ispopup=y].

SOURCE Weight Watchers International, Inc.

Investor Contact:

Corey Kinger
Brainerd Communicators, Inc.
(212) 986-6667
kinger@braincomm.com

###

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