NEW YORK, June 30 /PRNewswire-FirstCall/ -- Weight Watchers International,
Inc. (NYSE: WTW) today announced that on June 25, 2008 it received an adverse
ruling from the U.K. Court of Appeal with respect to the imposition of value
added tax, or VAT, on Weight Watchers meetings fees collected since April 1,
2005 by the Company's subsidiary, Weight Watchers (UK) Limited.
The Company previously disclosed that this adverse ruling, if received,
would result in a total estimated amount owed of approximately $50 million at
December 29, 2007, covering the period April 1, 2005 through the end of fiscal
2007. At the time of that disclosure, the Company recorded a charge of
approximately $23 million in accordance with SFAS 5, Accounting for
Contingencies. Therefore, as a result of this ruling, in the second quarter
of fiscal 2008, the Company will record a charge in the amount not previously
reserved for U.K. VAT for this prior period, currently estimated to be
approximately $28 million inclusive of interest accruing on this amount
through the second quarter of fiscal 2008. This incremental charge equates to
a one-time reduction to 2008 earnings per fully diluted share of approximately
$0.22.
On a going forward basis, the Company will record VAT charges associated
with U.K. meeting fees as earned, consistent with this ruling. The additional
2008 annualized charges for U.K. VAT resulting from this ruling are estimated
to be approximately $9 million. These additional charges are expected to have
the impact of reducing fiscal 2008 earnings per fully diluted share by
approximately $0.07, of which approximately $5 million, or $0.04 per fully
diluted share, is expected to be charged in the second quarter of 2008
reflecting the additional VAT for both the first and second quarters of fiscal
2008.
In summary, as a result of this ruling, the Company expects to incur a
charge in the second quarter of 2008 for the period April 1, 2005 through the
end of the second quarter of 2008 of approximately $33 million, or $0.26 per
fully diluted share. Both the prior period and the 2008 additional reduction
to 2008 earnings per fully diluted share were not included in the Company's
full year 2008 earnings guidance range.
As previously disclosed, for over a decade prior to April 1, 2005, Her
Majesty's Revenue and Customs, or HMRC, had determined that Weight Watchers
meetings fees in the U.K. were only partially subject to 17.5% standard rated
VAT. In March 2005, HMRC reversed its prior determinations and ruled that
meetings fees in the U.K. should be fully subject to 17.5% VAT. It was the
Company's view that HMRC's prior determinations should remain in effect and
the Company successfully appealed HMRC's new determination to the U.K. VAT and
Duties Tribunal, which ruled on March 8, 2007 that meetings fees should only
be partially subject to 17.5% VAT. HMRC appealed this ruling to the U.K. High
Court of Justice, which on January 21, 2008 upheld the VAT Tribunal's decision
in part and reversed its decision in part. Both the Company and HMRC appealed
the High Court's decision to the U.K. Court of Appeal.
On June 25, 2008, the U.K. Court of Appeal issued its ruling that Weight
Watchers meetings fees in the U.K. were fully subject to 17.5% VAT, reversing
the U.K. VAT Tribunal's 2007 decision in favor of the Company. The Company is
reviewing its options, including whether to seek permission to appeal the
Court of Appeal's ruling to the U.K. House of Lords.
About Weight Watchers International, Inc.
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 50,000
weekly meetings 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 contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on management's current expectations and beliefs, as well
as a number of assumptions concerning future events. These statements are
subject to risks, uncertainties, assumptions and other important factors.
Readers are cautioned not to put undue reliance on such forward-looking
statements because actual results may vary materially from those expressed or
implied. The reports filed by the Company pursuant to United States securities
laws contain discussions of these risks and uncertainties. The Company assumes
no obligation to, and expressly disclaims any obligation to, update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise. Readers are advised to review the Company's filings with
the United States 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).
Contact Information:
Investors:
Weight Watchers International, Inc. Brainerd Communicators, Inc.
Sarika Sahni Corey Kinger
Investor Relations (212) 986-6667
(212) 589-2751
SOURCE Weight Watchers International, Inc.
Investors: Sarika Sahni, Investor Relations, of Weight Watchers International,
Inc., +1-212-589-2751; or Corey Kinger of Brainerd Communicators, Inc.,
+1-212-986-6667
