Weight Watchers International, Inc. (NYSE: WTW) today announced its fiscal 2012 results for the fourth quarter and full year and provided full year fiscal 2013 earnings guidance.
Fourth quarter 2012 highlights include:
Revenues of $407.9 million, up 1.7% versus the prior year period, with total paid weeks up 4.5%
Internet revenues of $117.6 million, up 17.6% versus the prior year period, with Online paid weeks up 18.0% and end of period active Online subscribers up 18.0%
EPS of $1.03 for the quarter and full year 2012 EPS of $4.23; excluding a one-time net benefit related to the Company's settlement of its previously disclosed UK self-employment tax litigation, EPS for the quarter was $0.96 and full year 2012 EPS was $4.16
"While 2012 set a Company record for combined global meetings members and global Weight Watchers Online subscribers, we have been disappointed by our recruitment trends thus far in 2013," commented David Kirchhoff, Chief Executive Officer of the Company. "Our current marketing has not been as effective in this tough economic and increasingly competitive environment. In this context, we are taking appropriate steps to address these near-term challenges while continuing to pursue our long-term growth strategies. We are providing a 2013 full-year guidance range of $3.50 to $4.00 per fully diluted share."
Q4 2012 Consolidated Summary
Fourth quarter 2012 net income was $58.0 million versus $63.7 million in the prior year period. Earnings per fully diluted share (EPS) for Q4 2012 were $1.03 versus $0.86 in the prior year period.
Net income and EPS for Q4 2012 were impacted by certain items which affect 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. The $7.4 million pre-tax net benefit associated with the settlement consisted of an over-accrual reversal to cost of revenues of $14.5 million partially offset by an additional interest accrual of $7.1 million. Excluding this net benefit (after-tax) associated with the settlement, net income was $53.9 million and EPS was $0.96 in Q4 2012.
In addition, as in Q2 and Q3 2012, Q4 2012 EPS benefited from the completion of the Company's previously disclosed tender offer and related stock repurchase transaction. Foreign currency did not have a significant impact on EPS in Q4 2012.
Q4 2012 Global Results
Fourth quarter 2012 revenues increased 1.7% on a constant currency basis versus the prior year period, as the Company continued to benefit from strong growth globally in the WeightWatchers.com business. This growth in the WeightWatchers.com business was mostly offset by lower revenues in the meetings business as the Company experienced weaker volumes in North America and the UK.
Q4 2012 total paid weeks were up 4.5% as compared to the prior year period, on top of the 30.7% growth reported in Q4 2011 versus Q4 2010. Online paid weeks increased 18.0% versus the prior year period, on top of the 58.8% growth experienced in Q4 2011 versus Q4 2010. Meeting paid weeks decreased 7.9% versus the prior year period and attendance decreased 14.4% versus the prior year period.
Q4 2012 operating income increased 4.6% on a constant currency basis versus the prior year period. Excluding the $14.5 million over-accrual reversal benefit associated with the settlement of the UK self-employment tax litigation, Q4 2012 operating income decreased 7.4% on a constant currency basis versus the prior year period. Similar to the first nine months of fiscal 2012, gross margin expansion from the higher-margin WeightWatchers.com business was partially offset by gross margin contraction in the meetings business due to expenses associated with our retail initiative in North America, one-time costs associated with the transition to a new customer service provider in North America, and softer volumes. Gains in gross margin were more than offset by higher general and administrative and marketing expenses in Q4 2012 versus the prior year period due to increased investments in strategic initiatives and higher medical benefits expense, as well as higher advertising and marketing expense for the North American meetings business.
Q4 2012 NACO Performance
Fourth quarter 2012 meeting revenues for the North American meetings business (NACO) were down 1.9% on a constant currency basis versus the prior year period, as a result of continued lower enrollment volumes and continued weakness in the traditional meetings business. As a result, Q4 2012 meeting paid weeks and attendance decreased 7.3% and 14.5%, respectively, versus the prior year period.
Q4 2012 International Performance
Similar to the second and third quarters of fiscal 2012, Q4 2012 International meeting revenues were down 4.5% on a constant currency basis versus the prior year period, with growth in Continental Europe (CE) continuing to be more than offset by declines in the United Kingdom (UK).
UK: Fourth quarter 2012 UK meeting revenues decreased 10.6% on a constant currency basis versus the prior year period due to continued impact from a less effective marketing campaign and weak macro-economic trends.
CE: Fourth quarter 2012 CE meeting revenues were up 7.5% on a constant currency basis versus the prior year period, with paid weeks up 9.0% versus the prior year period. CE continued to benefit from successful marketing campaigns, particularly in France and Germany, despite a challenging macro-economic environment.
Q4 2012 WeightWatchers.com Performance