WEIGHT WATCHERS INTERNATIONAL INC - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

ý: QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 28, 2003

Commission File No. 000-03389

WEIGHT WATCHERS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)

Virginia		11-6040273
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

175 Crossways Park West, Woodbury, New York 11797-2055

(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code: (516) 390-1400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes ý No o

The number of common shares outstanding as of July 31, 2003 was 106,846,810.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX

		Page No.
Part I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Consolidated Balance Sheets as of June 28, 2003 and December 28, 2002	2
	Unaudited Consolidated Statements of Operations for the three months ended June 28, 2003 and June 29, 2002	3
	Unaudited Consolidated Statements of Operations for the six months ended June 28, 2003 and June 29, 2002	4
	Unaudited Consolidated Statements of Changes in Shareholders' Equity (Deficit) and Comprehensive Income for the six months ended June 28, 2003, and for the fiscal year ended December 28, 2002	5
	Unaudited Consolidated Statements of Cash Flows for the six months ended June 28, 2003 and June 29, 2002	6
	Notes to Unaudited Consolidated Financial Statements	7-22
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23-31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	33
Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 2.	Changes in Securities	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Submission of Matters to a Vote of Security Holders	34
Item 5.	Other Information	34
Item 6.	Exhibits and Reports on Form 8-K	34-35
Signatures		36
Exhibits

ITEM I. FINANCIAL STATEMENTS

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

			June 28, 2003			December 28, 2002
ASSETS
CURRENT ASSETS
	Cash and cash equivalents		$	52,234		$	57,530
	Receivables, net			25,591			19,106
	Inventories, net			33,500			38,583
	Prepaid expenses and other current assets			32,371			30,219

		TOTAL CURRENT ASSETS		143,696			145,438
Property and equipment, net				16,206			12,490
Notes and other receivables, noncurrent				222			243
Goodwill				486,772			308,199
Trademarks and other intangible assets, net				2,298			2,353
Deferred income taxes				119,060			131,487
Deferred financing costs and other noncurrent assets				10,184			9,693

		TOTAL ASSETS	$	778,438		$	609,903

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Portion of long-term debt due within one year		$	13,302		$	18,361
	Accounts payable			15,536			20,247
	Accrued interest			9,967			8,598
	Accrued liabilities			57,115			46,474
	Income taxes			16,029			14,269
	Deferred revenue			22,733			15,432

		TOTAL CURRENT LIABILITIES		134,682			123,381
Long-term debt				488,953			436,319
Deferred income taxes				3,233			3,256
Other				255			399

		TOTAL LONG-TERM DEBT AND OTHER LIABILITIES		492,441			439,974
SHAREHOLDERS' EQUITY
	Common stock, $0 par; 1,000,000 shares authorized; 111,988 shares issued; 106,804 shares outstanding at June 28, 2003 and 106,277 shares outstanding at December 28, 2002			—			—
	Treasury stock, at cost, 5,184 shares at June 28, 2003 and 5,711 shares at December 28, 2002			(20,932	)		(23,061	)
	Deferred compensation			(133	)		—
	Retained earnings			171,263			73,482
	Accumulated other comprehensive income (loss)			1,117			(3,873	)

		TOTAL SHAREHOLDERS' EQUITY		151,315			46,548

		TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	778,438		$	609,903

The accompanying notes are an integral part of the consolidated financial statements.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

			Three Months Ended
			June 28, 2003			June 29, 2002
Meeting fees, net			$	168,710		$	141,441
Product sales and other, net				90,159			76,452

		Revenues, net		258,869			217,893
Cost of revenues				116,132			96,012

		Gross profit		142,737			121,881
Marketing expenses				25,821			17,135
Selling, general and administrative expenses				19,280			14,225

		Operating income		97,636			90,521
Interest expense, net				10,798			10,405
Other (income) expenses, net				(868	)		12,796

		Income before income taxes and minority interest		87,706			67,320
Provision for income taxes				33,948			26,117

		Income before minority interest		53,758			41,203
Minority interest				(16	)		(17	)

		Net income	$	53,774		$	41,220

Net income per share:
	Basic		$	0.50		$	0.39

	Diluted		$	0.49		$	0.38

Weighted average common shares outstanding:
	Basic			106,708			105,883

	Diluted			109,760			109,558

The accompanying notes are an integral part of the consolidated financial statements.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

			Six Months Ended
			June 28, 2003		June 29, 2002
Meeting fees, net			$	322,195	$	275,797
Product sales and other, net				188,153		154,599

		Revenues, net		510,348		430,396
Cost of revenues				229,410		192,029

		Gross profit		280,938		238,367
Marketing expenses				67,315		46,460
Selling, general and administrative expenses				36,573		30,330

		Operating income		177,050		161,577
Interest expense, net				20,884		21,219
Other expenses, net				2,222		12,175

		Income before income taxes and minority interest		153,944		128,183
Provision for income taxes				59,582		49,670

		Income before minority interest		94,362		78,513
Minority interest				7		9

		Net income	$	94,355	$	78,504

Preferred stock dividends				—		254

		Net income available to common shareholders	$	94,355	$	78,250

Net income per share:
	Basic		$	0.89	$	0.74

	Diluted		$	0.86	$	0.72

Weighted average common shares outstanding:
	Basic			106,574		105,761

	Diluted			109,750		109,490

The accompanying notes are an integral part of the consolidated financial statements.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE INCOME
(IN THOUSANDS)

													Accumulated Other Comprehensive Income (Loss)
		Common Stock			Treasury Stock
		Common Stock			Treasury Stock					Deferred Compensation						Retained Earnings (Deficit)
		Shares	Amount		Shares		Amount			Deferred Compensation						Retained Earnings (Deficit)			Total
Balance at December 29, 2001		111,988	$	—	6,488		$	(26,196	)	$	—		$	(13,323	)	$	(73,998	)	$	(113,517	)
Comprehensive Income:
	Net income																143,694			143,694
	Translation adjustment, net of taxes													8,205						8,205
	Change in fair value of derivatives accounted for as hedges, net of taxes													1,245						1,245

Total Comprehensive Income																				153,144

Preferred stock dividend																	(254	)		(254	)
Stock options exercised					(777	)		3,135									(1,441	)		1,694
Tax benefit of stock options exercised																	6,331			6,331
Cost of secondary public equity offering																	(850	)		(850	)

Balance at December 28, 2002		111,988	$	—	5,711		$	(23,061	)	$	—		$	(3,873	)	$	73,482		$	46,548
Comprehensive Income:
	Net income																94,355			94,355
	Translation adjustment, net of taxes													3,973						3,973
	Change in fair value of derivatives accounted for as hedges, net of taxes													1,017						1,017

Total Comprehensive Income																				99,345

Stock options exercised					(527	)		2,129									(928	)		1,201
Tax benefit of stock options exercised																	4,195			4,195
Restricted stock issued to employees											(159	)					159			—
Compensation expense for restricted stock issued to employees											26									26

Balance at June 28, 2003		111,988	$	—	5,184		$	(20,932	)	$	(133	)	$	1,117		$	171,263		$	151,315

The accompanying notes are an integral part of the consolidated financial statements.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

			Six Months Ended
			June 28, 2003			June 29, 2002
Cash provided by operating activities			$	138,588		$	113,030

Investing activities:
	Capital expenditures			(2,231	)		(2,075	)
	Repayments from equity investment			5,000			—
	Cash paid for acquisitions			(181,520	)		(46,548	)
	Other items, net			(610	)		(202	)

		Cash used for investing activities		(179,361	)		(48,825	)

Financing activities:
	Net decrease in short-term borrowings			(2,712	)		(570	)
	Proceeds from borrowings			100,000			58,500
	Payment of dividends			—			(1,249	)
	Payments of long-term debt			(62,344	)		(66,134	)
	Redemption of redeemable preferred stock			—			(25,000	)
	Proceeds from stock options exercised			1,201			1,048
	Deferred financing costs			(821	)		—

		Cash provided by (used for) financing activities		35,324			(33,405	)

Effect of exchange rate changes on cash/cash equivalents and Other				153			2,242

Net (decrease) increase in cash and cash equivalents				(5,296	)		33,042
Cash and cash equivalents, beginning of period				57,530			23,338

Cash and cash equivalents, end of period			$	52,234		$	56,380

The accompanying notes are an integral part of the consolidated financial statements.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. Basis of Presentation

The accompanying consolidated financial statements include the accounts of Weight Watchers International, Inc. and subsidiaries (the "Company"). The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and include amounts that are based on management's best estimates and judgments. While all available information has been considered, actual amounts could differ from those estimates. The consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation.

The Management's Discussion and Analysis of Financial Condition and Results of Operations which follows these notes contains additional information on the results of operations, the financial position and cash flows of the Company. Those comments should be read in conjunction with these notes. The Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2002 includes additional information about the Company, its results of operations, its financial position and its cash flows, and should be read in conjunction with this Quarterly Report on Form 10-Q.

Recently Issued Accounting Standards:

In April 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB No. 13 and Technical Corrections". SFAS No. 145 rescinds SFAS No. 4, which required all gains and losses from the extinguishment of debt to be classified as an extraordinary item, and amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The provisions of SFAS No. 145 were effective for the Company beginning December 29, 2002. The adoption of SFAS No. 145 did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of commitment to an exit or disposal plan. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". Interpretation No. 45 requires the disclosure of certain guarantees and requires the recognition of a liability for the fair value of the obligation of qualifying guarantee activities. The Company has applied the recognition provisions of Interpretation No. 45 to guarantee activities initiated after December 31, 2002. The adoption of Interpretation No. 45 did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

to it. Interpretation No. 46 became effective for the Company on February 1, 2003 for variable interest entities created after January 31, 2003, and on June 29, 2003 for variable interest entities created prior to February 1, 2003. The adoption of Interpretation No. 46 did not impact the Company's consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure", an amendment of SFAS No. 123. SFAS No. 148 provides two additional alternative transition methods for recognizing an entity's voluntary decision to change its method of accounting for stock-based employee compensation to the fair value method. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 so that entities under the intrinsic value method of Accounting Principles Board Opinion ("APB") No. 25 will be required to disclose the pro forma effect of using the fair value method for any period for which an income statement is presented. The disclosures are required to be made in annual financial statements and in quarterly information provided to shareholders without regard to whether the entity has adopted SFAS No. 123 for recognition purposes. SFAS No. 148's transition guidance and provisions for annual disclosures are effective for fiscal years ending after December 15, 2002. The Company continues to apply the recognition and measurement principles of APB No. 25, "Accounting for Stock Issued to Employees", and related Interpretations in accounting for those plans. No compensation expense for employee stock options is reflected in earnings, as all options granted under the plans had an exercise price equal to the market value of the common stock on the date of grant.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments." This statement amends and clarifies financial accounting and reporting for derivative instruments including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement is effective for contracts entered into or modified after June 30, 2003 and hedging relationships designated after June 30, 2003. The Company will apply the provisions of SFAS No. 149 prospectively, however, management does not believe the adoption of SFAS No. 149 will have a material impact on the Company's consolidated financial position, results of operations or its cash flows.

Reclassification:

Certain prior year amounts have been reclassified to conform to the current year presentation.

2. Acquisitions

During fiscal 2003 and 2002, the Company acquired certain assets of its franchises as outlined below.

These acquisitions have been accounted for under the purchase method of accounting and, accordingly, earnings have been included in the consolidated operating results of the Company since the date of acquisition.

Effective March 30, 2003, the Company completed the acquisition of certain assets of eight of the fifteen franchises of The WW Group, Inc. and its affiliates ("the WW Group") pursuant to the terms of an Asset Purchase Agreement executed on March 31, 2003 among the WW Group, The WW Group East L.L.C., The WW Group West L.L.C., Cuida Kilos, S.A. de C.V., Weight Watchers North America, Inc. and the Company. The purchase price for the acquisition was $180,700 plus acquisition costs of $820. Assets acquired, which are currently recorded at net book value, include inventory ($2,553), prepaid expenses ($365) and property and equipment ($3,624). Management is in the process of finalizing the allocation of the purchase price, and therefore these allocations are subject to change. The excess of the aggregate purchase price over the assets acquired will be allocated to an indefinite lived intangible asset. The acquisition was financed through cash and additional borrowings of $85,000

under a new Term Loan D under the Company's Credit Facility (as defined below), as amended on April 1, 2003.

The following table presents unaudited pro forma financial information that reflects the consolidated operations of the Company and the acquired franchises of the WW Group as if the acquisition had occurred as of the beginning of the respective periods. The pro forma financial information does not give effect to any synergies that might result nor any discontinued expenses from the acquisition of the WW Group. Such discontinued expenses are estimated by management to be approximately $3,300, $7,400 and $3,400 for the six months ended June 28, 2003, June 29, 2002 and for the three months ended June 29, 2002, respectively. These expenses relate to corporate expenses of the owners of the WW Group and other indirect expenses of non-acquired franchises for the periods detailed below. This pro forma information does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of future results of operations of the consolidated companies.

	Pro Forma
	For the six months ended
	June 28, 2003		June 29, 2002		For the three months ended June 29, 2002
Revenue	$	530,060	$	471,743	$	239,353
Net Income	$	95,613	$	81,243	$	42,920
Diluted earnings per share	$	0.87	$	0.75	$	0.39

On September 1, 2002, the Company completed the acquisition of the assets of one of its franchisees, AZIS Properties of Raleigh Durham, Inc. (d/b/a Weight Watchers of Raleigh Durham), pursuant to the terms of an Asset Purchase Agreement among Weight Watchers of Raleigh Durham, the Company and Weight Watchers North America, Inc., a wholly owned subsidiary of the Company. The purchase price for the acquisition was $10,600 and was financed through cash from operations.

On July 2, 2002, the Company completed the acquisition of the assets of one of its franchisees, Weight Watchers of San Diego and The Inland Empire, Inc., pursuant to the terms of an Asset Purchase Agreement among Weight Watchers of San Diego, the Company and Weight Watchers North America, Inc. Substantially the entire purchase price in excess of the net assets acquired has been recorded as goodwill. The purchase price for the acquisition was $11,000 and was financed through cash from operations.

On January 18, 2002, the Company completed the acquisition of the assets of one of its franchisees, Weight Watchers of North Jersey, Inc., pursuant to the terms of an Asset Purchase Agreement executed on December 31, 2001 among Weight Watchers of North Jersey, Inc., the Company and Weight Watchers North America, Inc. Substantially all of the purchase price in excess of the net assets acquired has been recorded as goodwill. The purchase price for the acquisition was $46,500. The acquisition was financed through additional borrowings from the Company's Revolving Credit Facility under its Amended and Restated Credit Agreement, as amended on January 16, 2001, and December 21, 2001 (the "Credit Facility"). This additional borrowing was subsequently repaid by the end of the second quarter of 2002.

For 2002, acquired assets totaled $461 which included inventory ($155), property and equipment ($282) and other assets ($24). The excess of the aggregate purchase price over the assets acquired was allocated to goodwill.

3. Goodwill and Intangible Assets

In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets", the Company no longer amortizes goodwill. The Company performed a fair value impairment test as of December 28,

2002 on its goodwill which determined that no impairment loss was necessary. Unamortized goodwill is due mainly to acquisitions of the Company's franchised territories. For the six months ended June 28, 2003, goodwill increased due mainly to the acquisition of certain of the assets of the WW Group.

Also, in accordance with SFAS No. 142, aggregate amortization expense for definite lived intangible assets was recorded in the amounts of $244 and $483 for the three and six months ended June 28, 2003, respectively. Aggregate amortization expense of definite lived intangible assets for the three and six months ended June 29, 2002 was $212 and $464, respectively.

The carrying amount of amortized intangible assets was as follows:

	June 28, 2003				December 28, 2002
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Deferred software cost	$	9,729	$	9,254	$	9,488	$	9,097
Trademarks		7,357		6,771		7,223		6,674
Non-compete Agreement		1,200		725		1,200		575
Other		3,995		3,233		3,985		3,197

	$	22,281	$	19,983	$	21,896	$	19,543

Estimated amortization expense of definite lived intangible assets for the next five fiscal years is as follows:

Remainder of 2003	$	408
2004	$	691
2005	$	274
2006	$	144
2007	$	106

4. Long-Term Debt

On September 29, 1999, the Company entered into a recapitalization and stock purchase agreement (the "Transaction") with its former parent, H.J. Heinz Company ("Heinz"). In connection with the Transaction, the Company entered into a Credit Facility. As amended on January 16, 2001, the Credit Facility provided for (i) a $90,000 term loan A facility ("Term Loan A"), (ii) a $75,000 term loan B facility ("Term Loan B"), (iii) an $87,000 transferable loan certificate ("TLC"), (iv) a $20,000 term loan D facility ("Term Loan D") and (v) a revolving credit facility with borrowings up to $45,000 ("Revolving Credit Facility"). On December 21, 2001, the Credit Facility was refinanced as follows: (i) Term Loan B, Term Loan D and the TLC in the amount of $71,000, $19,000 and $82,000, respectively, were repaid and replaced with a new Term Loan B of $108,000 and a new TLC of $64,000. Borrowings under the Credit Facility are paid quarterly and bear interest at rates that varied through the six months ended June 28, 2003 from 3.03% to 5.75%. On April 1, 2003, in connection with the acquisition of certain of the assets of the WW Group, the Company borrowed an additional $85,000 under a new Term Loan D pursuant to the Credit Facility, as amended on that date.

In addition, as part of the Transaction, the Company issued 150,000 USD denominated and 100,000 EUR denominated principal amount of 13% Senior Subordinated Notes due 2009 (the "Notes"). At June 28, 2003, the 100,000 EUR Notes translated into 114,300 USD denominated equivalent (see Note 11).

5. Earnings Per Share

Basic earnings per share ("EPS") computations are calculated utilizing the weighted average number of common shares outstanding during the periods presented. Diluted EPS includes the weighted average number of common shares outstanding and the effect of common stock equivalents.

The following table sets forth the computation of basic and diluted EPS:

			Three Months Ended				Six Months Ended
			June 28, 2003		June 29, 2002		June 28, 2003		June 29, 2002
Numerator:
	Net income		$	53,774	$	41,220	$	94,355	$	78,504
	Preferred stock dividends			—		—		—		254

		Numerator for basic and diluted EPS — income available to common shareholders	$	53,774	$	41,220	$	94,355	$	78,250

Denominator:
	Weighted-average shares			106,708		105,883		106,574		105,761
	Effect of dilutive securities: stock options			3,052		3,675		3,176		3,729

	Denominator for diluted EPS—weighted-average shares			109,760		109,558		109,750		109,490

EPS:
	Basic EPS		$	0.50	$	0.39	$	0.89	$	0.74

	Diluted EPS		$	0.49	$	0.38	$	0.86	$	0.72

6. Stock Plans

The Company has stock-based employee compensation plans and continues to apply the recognition and measurement principles of APB No. 25, "Accounting for Stock Issued to Employees", and related Interpretations in accounting for those plans. No compensation expense for employee stock options is reflected in earnings, as all options granted under the plans had an exercise price equal to the market value of the common stock on the date of grant.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123:

		Three Months Ended				Six Months Ended
		June 28, 2003		June 29, 2002		June 28, 2003		June 29, 2002
Net income, as reported		$	53,774	$	41,220	$	94,355	$	78,504
Deduct:
	Total stock-based employee compensation expense determined under the fair value method for all stock options awards, net of related tax effect		518		167		976		338

Pro forma net income		$	53,256	$	41,053	$	93,379	$	78,166

Earnings per share:
	Basic — as reported	$	0.50	$	0.39	$	0.90	$	0.74

	Basic — pro forma	$	0.50	$	0.39	$	0.88	$	0.74

	Diluted — as reported	$	0.49	$	0.38	$	0.87	$	0.72

	Diluted — pro forma	$	0.49	$	0.37	$	0.85	$	0.71

7. Income Taxes

The effective tax rate for the three and six months ended June 28, 2003 was 38.7%. The effective tax rate for the three and six months ended June 29, 2002 was 38.8%. For the three and six months ended June 28, 2003 and June 29, 2002, the primary differences between the U.S. federal statutory tax rate and the Company's effective tax rate were state income taxes, offset by lower statutory tax rates in certain foreign jurisdictions.

8.: WeightWatchers.com

Loan Agreement:

Pursuant to the amended loan agreement dated September 10, 2001 between the Company and WeightWatchers.com, through fiscal 2001 the Company provided loans to WeightWatchers.com aggregating $34,500. The Company has no further obligation to provide funding to WeightWatchers.com. Beginning on January 1, 2002, the loan bears interest at 13% per year, and beginning March 31, 2002, interest has been and shall be paid to the Company semi-annually. All principal outstanding under the agreement is payable in six semi-annual installments commencing on March 31, 2004. The Company recorded interest income on the loan for the three and six months ended June 28, 2003 of $1,115 and $2,233, respectively, as compared to the three and six months ended June 29, 2002 of $1,118 and $2,218, respectively. The interest receivable balance as of June 28, 2003 and December 28, 2002 was $946 and $1,106, respectively, and is included within receivables, net. As WeightWatchers.com is an equity investee, and the Company was the only entity providing funding through fiscal 2001, the Company reduced its loan receivable balances by 100% of WeightWatchers.com's losses. Additionally, the remaining loan receivable balances were reviewed for

impairment on a quarterly basis and, accordingly, during fiscal 2001, the Company recorded a full valuation allowance against the remaining balances. For the three months ended June 28, 2003, the Company recorded in other (income) expense, net a voluntary loan repayment of $5,000.

Intellectual Property License:

The Company entered into an amended and restated intellectual property license agreement dated September 29, 2001 with WeightWatchers.com. In fiscal 2002, the Company began earning royalties pursuant to the agreement. For the three and six months ended June 28, 2003, the Company recorded royalty income of $1,861 and $3,480, respectively, and for the three and six months ended June 29, 2002, the Company recorded $987 and $1,707, respectively, which is included in product sales and other, net. The royalty receivable balance as of June 28, 2003 and December 28, 2002 was $1,861 and $1,280, respectively, and is included within receivables, net.

Service Agreement:

Simultaneous with the signing of the amended and restated intellectual property license agreement, the Company entered into a service agreement with WeightWatchers.com under which WeightWatchers.com provides certain types of services. The Company is required to pay for all expenses incurred by WeightWatchers.com directly attributable to the services it performs under this agreement, plus a fee of 10% of those expenses. The Company recorded service expense for the three and six months ended June 28, 2003 of $419 and $798, respectively, and $479 and $754 for the three and six months ended June 29, 2002, respectively, all of which was included in marketing expenses. The accrued service payable at June 28, 2003 and December 28, 2002 was $793 and $484, respectively, and is netted against receivables, net.

9. Derivative Instruments and Hedging

The Company enters into forward and swap contracts to hedge transactions denominated in foreign currencies in order to reduce currency risk associated with fluctuating exchange rates. These contracts are used primarily to hedge certain foreign currency cash flows and for payments arising from some of the Company's foreign currency denominated debt obligations. In addition, the Company enters into interest rate swaps to hedge a substantial portion of its variable rate debt. As of June 28, 2003 and June 29, 2002, the Company held currency and interest rate swap contracts to purchase certain foreign currencies with notional amounts totaling $122,014 and $211,955, respectively. The Company also held separate currency and interest rate swap contracts to sell foreign currencies of $130,582 and $218,736, respectively.

As of June 28, 2003, cumulative losses of $2,867 ($1,659 net of taxes) for qualifying hedges were reported as a component of accumulated other comprehensive loss. For the three and six months ended June 28, 2003 and June 29, 2002, respectively, the ineffective portion of changes in fair values of cash flow hedges was not material. In addition, for the three and six months ended June 28, 2003, reclassification to earnings from accumulated other comprehensive loss resulted in an increase to net income of $950 ($1,558 before taxes) and $1,452 ($2,381 before taxes), respectively. For the three and six months ended June 29, 2002, reclassification to earnings from accumulated other comprehensive loss resulted in an increase to net income of $1,682 ($2,669 before taxes) and $1,540 ($2,444 before taxes), respectively.

10. Comprehensive Income

Comprehensive income for the Company includes net income, the effects of foreign currency translation and changes in the fair value of derivative instruments. Comprehensive income is as follows:

	Three Months Ended				Six Months Ended
	June 28, 2003		June 29, 2002		June 28, 2003		June 29, 2002
Net income	$	53,774	$	41,220	$	94,355	$	78,504
Foreign currency translation adjustment		2,791		2,804		3,973		7,514
Current period changes in fair value of derivatives		275		77		1,017		270

Comprehensive income	$	56,840	$	44,101	$	99,345	$	86,288

11. Subsequent Event

On July 21, 2003, the Company commenced a cash tender offer and consent solicitation for all of its 150,000 USD denominated and 100,000 EUR denominated principal amount of 13% Senior Subordinated Notes due 2009. The tender offer will expire on August 18, 2003. The consideration for the tender offer and consent solicitation will be funded from cash on hand and additional borrowings under the Credit Facility that will be refinanced, amended and restated in connection with the tender offer. In conjunction with the tender offer, the Company is soliciting consents to eliminate substantially all of the restrictive covenants and certain default provisions in the indentures pursuant to which the Notes were issued.

On July 30, 2003, the Company amended the tender offer by increasing the tender offer consideration and extending the consent date to August 6, 2003 at 12:00 midnight, New York City time. On August 7, 2003, the Company announced receipt of requisite consents and tenders for over 90% of its Senior Subordinated Notes.

In the third quarter 2003, the Company will recognize expenses of approximately $47,000 associated with the tender premium and approximately $5,000 for the write-off of deferred financing fees incurred in conjunction with the issuance in 1999 of the 13% Senior Subordinated Notes.

12. Guarantor Subsidiaries

The Company's payment obligations under the Notes are fully and unconditionally guaranteed on a joint and several basis by the following wholly-owned subsidiaries: 58 WW Food Corp.; Waist Watchers, Inc.; Weight Watchers Camps, Inc.; W.W. Camps and Spas, Inc.; Weight Watchers Direct, Inc.; W/W Twentyfirst Corporation; W.W. Weight Reduction Services, Inc.; W.W.I. European Services Ltd.; W.W. Inventory Service Corp.; Weight Watchers North America, Inc.; Weight Watchers UK Holdings Ltd.; Weight Watchers International Holdings Ltd.; Weight Watchers (U.K.) Limited; Weight Watchers (Exercise) Ltd.; Weight Watchers (Accessories & Publication) Ltd.; Weight Watchers (Food Products) Limited; Weight Watchers New Zealand Limited; BLTC Pty Ltd.; LLTC Pty Ltd.; Weight Watchers Asia Pacific Finance Limited Partnership (APF); Weight Watchers International Pty Limited; Fortuity Pty Ltd.; and Gutbusters Pty Ltd. (collectively, the "Guarantor Subsidiaries"). The obligations of each Guarantor Subsidiary under its guarantee of the Notes are subordinated to such subsidiary's obligations under its guarantee of the Credit Facility.

Presented below is condensed consolidating financial information for Weight Watchers International, Inc. ("Parent Company"), the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries (primarily companies incorporated in European countries other than the United Kingdom). In the Company's opinion, separate financial statements and other disclosures regarding each of the Guarantor Subsidiaries would not provide additional information that is material to investors. Therefore, the Guarantor Subsidiaries are combined in the presentation below.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONSOLIDATING BALANCE SHEET
AS OF JUNE 28, 2003
(IN THOUSANDS)

			Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
CURRENT ASSETS
	Cash and cash equivalents		$	16,344		$	23,687		$	12,203	$	—		$	52,234
	Receivables, net			4,867			18,086			2,638		—			25,591
	Inventories, net			—			26,116			7,384		—			33,500
	Prepaid expenses and other current assets			5,190			22,764			4,417		—			32,371
	Intercompany (payables) receivables			(153,511	)		133,580			19,931		—			—

		TOTAL CURRENT ASSETS		(127,110	)		224,233			46,573		—			143,696
Investment in consolidated subsidiaries				640,266			—			—		(640,266	)		—
Property and equipment, net				1,354			13,079			1,773		—			16,206
Notes and other receivables, noncurrent				222			—			—		—			222
Goodwill				26,769			459,160			843		—			486,772
Trademarks and other intangible assets, net				1,026			1,272			—		—			2,298
Deferred income taxes				34,907			84,153			—		—			119,060
Deferred financing costs and other noncurrent assets				8,639			(301	)		1,846		—			10,184

		TOTAL ASSETS	$	586,073		$	781,596		$	51,035	$	(640,266	)	$	778,438

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Portion of long-term debt due within one year		$	12,803		$	499		$	—	$	—		$	13,302
	Accounts payable			1,204			9,276			5,056		—			15,536
	Accrued interest			9,564			403			—		—			9,967
	Accrued liabilities			17,271			30,541			9,303		—			57,115
	Income taxes			(48,895	)		63,218			1,706		—			16,029
	Deferred revenue			151			21,307			1,275		—			22,733

		TOTAL CURRENT LIABILITIES		(7,902	)		125,244			17,340		—			134,682
Long-term debt				440,179			48,774			—		—			488,953
Deferred income taxes				2,481			—			752		—			3,233
Other				—			175			80		—			255

		TOTAL LONG-TERM DEBT AND OTHER LIABILITIES		442,660			48,949			832		—			492,441
Shareholders' equity				151,315			607,403			32,863		(640,266	)		151,315

		TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	586,073		$	781,596		$	51,035	$	(640,266	)	$	778,438

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 28, 2002
(IN THOUSANDS)

			Parent Company			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
CURRENT ASSETS
	Cash and cash equivalents		$	34,694		$	14,808	$	8,028	$	—		$	57,530
	Receivables, net			3,467			13,972		1,667		—			19,106
	Inventories, net			—			30,021		8,562		—			38,583
	Prepaid expenses and other current assets			2,453			21,054		6,712		—			30,219
	Intercompany (payables) receivables			(228,146	)		218,449		9,697		—			—

		TOTAL CURRENT ASSETS		(187,532	)		298,304		34,666		—			145,438
Investment in consolidated subsidiaries				556,952			—		—		(556,952	)		—
Property and equipment, net				1,380			9,401		1,709		—			12,490
Notes and other receivables, noncurrent				243			—		—		—			243
Goodwill				26,769			280,660		770		—			308,199
Trademarks and other intangible assets, net				897			1,456		—		—			2,353
Deferred income taxes				39,655			91,832		—		—			131,487
Deferred financing costs and other noncurrent assets				8,479			776		438		—			9,693

		TOTAL ASSETS	$	446,843		$	682,429	$	37,583	$	(556,952	)	$	609,903

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Portion of long-term debt due within one year		$	17,632		$	729	$	—	$	—		$	18,361
	Accounts payable			1,217			14,679		4,351		—			20,247
	Accrued interest			8,125			473		—		—			8,598
	Accrued liabilities			17,084			21,265		8,125		—			46,474
	Income taxes			(25,544	)		39,363		450		—			14,269
	Deferred revenue			100			14,118		1,214		—			15,432

		TOTAL CURRENT LIABILITIES		18,614			90,627		14,140		—			123,381
Long-term debt				379,200			57,119		—		—			436,319
Deferred income taxes				2,481			—		775		—			3,256
Other				—			325		74		—			399

		TOTAL LONG-TERM DEBT AND OTHER LIABILITIES		381,681			57,444		849		—			439,974
Shareholders' equity				46,548			534,358		22,594		(556,952	)		46,548

		TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	446,843		$	682,429	$	37,583	$	(556,952	)	$	609,903

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 28, 2003
(IN THOUSANDS)

		Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net		$	3,323		$	213,528		$	42,018		$	—		$	258,869
Cost of revenues			(75	)		92,535			23,672			—			116,132

	Gross profit		3,398			120,993			18,346			—			142,737
Marketing expenses			540			17,863			7,418			—			25,821
Selling, general and administrative expenses			3,887			11,643			3,750			—			19,280

	Operating (loss) income		(1,029	)		91,487			7,178			—			97,636
Interest expense (income), net			8,821			2,208			(231	)		—			10,798
Other (income) expenses, net			(228	)		(646	)		6			—			(868	)
Equity in income of consolidated subsidiaries			38,790			—			—			(38,790	)		—
Franchise commission income (loss)			20,684			(18,036	)		(2,648	)		—			—

	Income before income taxes and minority interest		49,852			71,889			4,755			(38,790	)		87,706
(Benefit from) provision for income taxes			(3,922	)		35,551			2,319			—			33,948

	Income before minority interest		53,774			36,338			2,436			(38,790	)		53,758
Minority interest			—			—			(16	)		—			(16	)

	Net income	$	53,774		$	36,338		$	2,452		$	(38,790	)	$	53,774

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 29, 2002
(IN THOUSANDS)

		Parent Company		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net		$	2,611	$	186,521		$	28,761		$	—		$	217,893
Cost of revenues			59		79,944			16,009			—			96,012

	Gross profit		2,552		106,577			12,752			—			121,881
Marketing expenses			—		13,304			3,831			—			17,135
Selling, general and administrative expenses			301		11,216			2,708			—			14,225

	Operating income		2,251		82,057			6,213			—			90,521
Interest expense (income), net			8,109		2,522			(226	)		—			10,405
Other expenses (income), net			13,291		(490	)		(5	)		—			12,796
Equity in income of consolidated subsidiaries			47,026		—			—			(47,026	)		—
Franchise commission income (loss)			17,424		(15,672	)		(1,752	)		—			—

	Income before income taxes and minority interest		45,301		64,353			4,692			(47,026	)		67,320
Provision for income taxes			4,081		20,386			1,650			—			26,117

	Income before minority interest		41,220		43,967			3,042			(47,026	)		41,203
Minority interest			—		—			(17	)		—			(17	)

	Net income	$	41,220	$	43,967		$	3,059		$	(47,026	)	$	41,220

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 28, 2003
(IN THOUSANDS)

		Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net		$	6,205		$	417,387		$	86,756		$	—		$	510,348
Cost of revenues			—			181,373			48,037			—			229,410

	Gross profit		6,205			236,014			38,719			—			280,938
Marketing expenses			1,020			50,477			15,818			—			67,315
Selling, general and administrative expenses			6,946			22,455			7,172			—			36,573

	Operating (loss) income		(1,761	)		163,082			15,729			—			177,050
Interest expense (income), net			16,766			4,513			(395	)		—			20,884
Other expenses (income), net			2,296			(46	)		(28	)		—			2,222
Equity in income of consolidated subsidiaries			91,123			—			—			(91,123	)		—
Franchise commission income (loss)			39,736			(35,093	)		(4,643	)		—			—

	Income before income taxes and minority interest		110,036			123,522			11,509			(91,123	)		153,944
Provision for income taxes			15,681			39,576			4,325			—			59,582

	Income before minority interest		94,355			83,946			7,184			(91,123	)		94,362
Minority interest			—			—			7			—			7

	Net income	$	94,355		$	83,946		$	7,177		$	(91,123	)	$	94,355

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 29, 2002
(IN THOUSANDS)

		Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net		$	4,121		$	368,003		$	58,272		$	—		$	430,396
Cost of revenues			119			160,066			31,844			—			192,029

	Gross profit		4,002			207,937			26,428			—			238,367
Marketing expenses			—			38,047			8,413			—			46,460
Selling, general and administrative expenses			4,566			20,735			5,029			—			30,330

	Operating (loss) income		(564	)		149,155			12,986			—			161,577
Interest expense (income), net			16,734			4,901			(416	)		—			21,219
Other expenses (income), net			11,881			314			(20	)		—			12,175
Equity in income of consolidated subsidiaries			83,833			—			—			(83,833	)		—
Franchise commission income (loss)			33,893			(30,493	)		(3,400	)		—			—

	Income before income taxes and minority interest		88,547			113,447			10,022			(83,833	)		128,183
Provision for income taxes			10,043			36,070			3,557			—			49,670

	Income before minority interest		78,504			77,377			6,465			(83,833	)		78,513
Minority interest			—			—			9			—			9

	Net income	$	78,504		$	77,377		$	6,456		$	(83,833	)	$	78,504

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 28, 2003
(IN THOUSANDS)

			Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
		Cash provided by operating activities	$	8,701		$	218,028		$	2,982		$	(91,123	)	$	138,588

Investing activities:
	Capital expenditures			(192	)		(1,687	)		(352	)		—			(2,231	)
	Repayments from equity investment			5,000			—			—			—			5,000
	Cash paid for acquistions			—			(181,520	)		—			—			(181,520	)
	Other items, net			(373	)		(276	)		39			—			(610	)

		Cash provided by (used for) investing activities		4,435			(183,483	)		(313	)		—			(179,361	)

Financing activities:
	Net decrease in short-term borrowings			(475	)		(2,237	)		—			—			(2,712	)
	Proceeds from borrowings			100,000			—			—			—			100,000
	Parent company investment in subsidiaries			(83,314	)		—			—			83,314			—
	Payment of dividends			—			(12,762	)		(691	)		13,453			—
	Payments on long-term debt			(53,770	)		(8,574	)		—			—			(62,344	)
	Proceeds from stock options exercised			1,201			—			—			—			1,201
	Deferred financing costs			(821	)		—			—			—			(821	)

		Cash (used for) provided by financing activities		(37,179	)		(23,573	)		(691	)		96,767			35,324

Effect of exchange rate changes on cash and cash equivalents				5,693			(2,093	)		2,197			(5,644	)		153

Net (decrease) increase in cash and cash equivalents				(18,350	)		8,879			4,175			—			(5,296	)
Cash and cash equivalents, beginning of period				34,694			14,808			8,028			—			57,530

Cash and cash equivalents, end of period			$	16,344		$	23,687		$	12,203		$	—		$	52,234

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL UNAUDITED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 29, 2002
(IN THOUSANDS)

			Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
		Cash provided by operating activities	$	118,576		$	74,987		$	3,300		$	(83,833	)	$	113,030

Investing activities:
	Capital expenditures			(105	)		(1,668	)		(302	)		—			(2,075	)
	Cash paid for acquisitions			—			(46,548	)		—			—			(46,548	)
	Other items, net			(147	)		(58	)		3			—			(202	)

		Cash used for investing activities		(252	)		(48,274	)		(299	)		—			(48,825	)
Financing activities:
	Net decrease in short-term borrowings			(741	)		171			—			—			(570	)
	Parent company investment in subsidiaries			(76,135	)		—			—			76,135			—
	Proceeds from borrowings			58,500			—			—			—			58,500
	Payment of dividends			(1,249	)		(14,417	)		—			14,417			(1,249	)
	Payments on long-term debt			(65,975	)		(159	)		—			—			(66,134	)
	Redemption of redeemable preferred stock			(25,000	)		—			—			—			(25,000	)
	Proceeds from stock options exercised			1,048			—			—			—			1,048

		Cash used for financing activities		(109,552	)		(14,405	)		—			90,552			(33,405	)

Effect of exchange rate changes on cash and cash equivalents				6,401			1,194			1,366			(6,719	)		2,242

Net increase in cash and cash equivalents				15,173			13,502			4,367			—			33,042
Cash and cash equivalents, beginning of period				6,230			8,804			8,304			—			23,338

Cash and cash equivalents, end of period			$	21,403		$	22,306		$	12,671		$	—		$	56,380

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 28, 2002 that includes additional information about us, our results of operations, our financial position and our cash flows. Except for historical information contained herein, the matters discussed in this Quarterly Report on Form 10-Q include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 including, in particular, statements about our plans, strategies and prospects under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations." We have used the words "may", "will", "expect", "anticipate", "believe", "estimate", "plan", "intend", and similar expressions in this Quarterly Report on Form 10-Q and the documents incorporated by reference in this Quarterly Report on Form 10-Q to identify forward-looking statements. We have based these forward-looking statements on our 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, including competition from self-help, pharmaceutical, surgical, dietary supplement and meal replacement products, and other weight and exercise-related programs and products;
•: risks associated with the relative success of our marketing and advertising;
•: risks associated with the continued attractiveness of our programs;
•: risks associated with our ability to meet our obligations related to our outstanding indebtedness;
•: risks associated with general economic conditions; and
•: adverse results in litigation and regulatory matters, the adoption of adverse legislation or regulations, more aggressive enforcement of existing legislation or regulations or a change in the interpretation of existing legislation or regulations.

You should not put undue reliance on any forward-looking statements. You should understand that many important factors, including those discussed under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations", could cause our results to differ materially from those expressed or suggested in any forward-looking statements. Except as required by law, we do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances that occur after the date of this Quarterly Report or to reflect the occurrence of unanticipated events.

Critical Accounting Policies

For a discussion of the critical accounting policies affecting us, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Significant Accounting Policies" beginning on page 17 of our Annual Report on Form 10-K for the fiscal year ended December 28, 2002. The critical accounting policies affecting us have not changed since December 28, 2002.

Results of Operations

Figures are rounded to the nearest one hundred thousand; percentage changes are based on rounded figures. Attendance percentage changes are based on rounded figures to the nearest thousand.

Comparison of the three months ended June 28, 2003 to the three months ended June 29, 2002

Net revenues were $258.9 million for the three months ended June 28, 2003, an increase of $41.0 million, or 18.8%, from $217.9 million for the three months ended June 29, 2002. The 18.8% increase in net revenues was partially the result of worldwide attendance growth of 11.7% driving a $27.3 million increase in classroom meeting fees. The other major components of the $41.0 million increase in net revenues this quarter versus second quarter 2002 were $11.6 million of product sales and $4.4 million of advertising revenues and licensing and publication royalties partially offset by $2.4 million of lower franchise commissions. Included in the $41.0 million increase is a benefit of approximately $13.0 million from currency translation.

At the beginning of the second quarter of 2003, we acquired certain assets of The WW Group, Inc. and its affiliate franchises ("the WW Group") consisting of eight territories and adding approximately 5 million attendances on an annual basis (based on 2002 actuals as reported by the WW Group). The information reported here includes the results of the WW Group since the date of its acquisition on March 30, 2003.

For the three months ended June 28, 2003, total classroom meeting fees were $168.7 million, an increase of $27.3 million, or 19.3%, from $141.4 million for the three months ended June 29, 2002. Total attendances reached 16.7 million versus 15.0 million in the prior year quarter. In North American company-owned, or NACO, operations, second quarter 2003 classroom meetings fees were $110.7 million, up 12.7% from $98.2 million in last year's second quarter. NACO attendance grew 12.8% in the quarter over the prior year comparable period, including the impact of the WW Group, San Diego and North Carolina franchise acquisitions, which were not owned during the second quarter of 2002. On an organic basis, NACO attendance declined 6.3% as a result of a combination of factors. A late Easter this year versus last shortened our Spring diet season by three weeks in the second quarter. In addition, the planned delay of the NACO program innovation launch beyond the normal 2 year cycle, from January 2003 to August/September 2003, coincided with intensified promotion of "low-carb/high-fat" self-help diets.

In our international geographies, recent innovations in Continental Europe (September 2002) and the UK (January 2003) were well received. In the second quarter 2003, attendances grew 13.2% over the 2002 level in the highly competitive UK market and 13.3% in Continental Europe. On an overall basis, international company-owned classroom meeting fees were $58.0 million for the three months ended June 28, 2003, an increase of $14.8 million, or 34.3%, from $43.2 million for the three months ended June 29, 2002, on attendance growth of 10.3%. Approximately half of the increase in meeting fees was the result of currency translation benefits.

Product sales were $74.7 million for the three months ended June 28, 2003, an increase of $11.6 million, or 18.4%, from $63.1 million for the three months ended June 29, 2002. Product sales increased 10.5% to $43.1 million domestically and 31.1% to $31.6 million internationally as a result of attendance growth in combination with higher product sales per individual attendance.

Franchise royalties were $4.4 million domestically and $1.7 million internationally for the three months ended June 28, 2003. In total, franchise royalties decreased $2.4 million, or 28.2%, from $8.5 million for the three months ended June 29, 2002, to $6.1 million for the comparable period this year. The decrease resulted primarily from the impact of having three fewer franchises in the second quarter 2003 versus the prior year quarter (San Diego and North Carolina were acquired during the second half of 2002 and the WW Group franchises were acquired in the second quarter of 2003).

Revenues from publications, licensing and other royalties were $9.3 million for the three months ended June 28, 2003, an increase of $4.4 million, or 89.8%, from $4.9 million for the three months ended June 29, 2002. Advertising revenues from our publications, most notably Weight Watchers

Magazine, accounted for $2.0 million of the increase, with the remainder stemming from $1.6 million in licensing revenues and $.9 million in the royalty received from WeightWatchers.com.

Cost of revenues was $116.1 million for the three months ended June 28, 2003, an increase of $20.1 million, or 20.9%, from $96.0 million for the three months ended June 29, 2002, as compared to the 18.8% increase in total revenues. Gross profit margin was 55.1% of sales in the three months ended June 28, 2003, a slight decrease from the 55.9% level in last year's second quarter.

Marketing expenses increased $8.7 million, or 50.9%, to $25.8 million in the three months ended June 28, 2003 from $17.1 million in the three months ended June 29, 2002. As a percentage of net revenues, marketing expenses increased from 7.9% to 10.0% for the current period versus prior. In the second quarter, we continued to make investments in marketing initiatives begun in the first quarter. We have added to our successful investment in certain of our European locations to spur growth and increase brand awareness. In NACO, we continued marketing support of our Winning Points program, now in its third year. Marketing expenses also rose as a result of the acquisition of the WW Group territories.

Selling, general and administrative expenses were $19.3 million for the three months ended June 28, 2003, an increase of $5.1 million, or 35.9%, from $14.2 million for the three months ended June 29, 2002, as a result of currency translation, normal increases for salaries and expenses, higher legal fees and insurance rates, expenses related to our acquisitions and some increases in staff to support our growth. We are also facing increased expenses associated with additional regulatory and compliance requirements. Selling, general and administrative expenses as a percentage of revenues were 7.5% in this year's second quarter as compared to 6.5% a year ago.

Operating income was $97.6 million for the three months ended June 28, 2003, an increase of $7.1 million, or 7.8%, from $90.5 million for the three months ended June 29, 2002. The operating income margin in the second quarter of 2003 was 37.7%, as compared to 41.5% in the second quarter of 2002, primarily as a result of our increased investment in marketing.

For the three months ended June 28, 2003, other expenses (income), net were $0.9 million of income, as compared to $12.8 million of expense for the three months ended June 29, 2002. In the second quarter 2003, we recorded $4.7 million of unrealized losses on foreign currency denominated debt and other obligations, net of hedges, as compared to $11.5 million of unrealized losses in the second quarter of 2002. In addition, for the three months ended June 28, 2003, other expenses (income), net included a $5.0 million voluntary loan repayment from WeightWatchers.com.

Comparison of the six months ended June 28, 2003 to the six months ended June 29, 2002

Net revenues were $510.3 million for the six months ended June 28, 2003, an increase of $79.9 million, or 18.6%, from $430.4 million for the six months ended June 29, 2002. The 18.6% increase in net revenues was partially the result of worldwide attendance growth of 9.6% driving a $46.4 million increase in classroom meeting fees. The other major components of the $79.9 million increase in net revenues this period versus the first half of 2002 were $28.1 million of product sales and $8.5 million of advertising revenues and licensing and publication royalties partially offset by $3.1 million of lower franchise commissions. Included in the $79.9 million increase is a benefit of approximately $27.0 million from currency translation.

Total classroom meeting fees were $322.2 million for the six months ended June 28, 2003, an increase of $46.4 million, or 16.8%, from $275.8 million for the six months ended June 29, 2002. Total attendances reached 33.0 million versus 30.1 million in the prior year period. In NACO operations, classroom meetings fees were $206.2 million in the first half of 2003, up 9.4% from $188.5 million in last year's first half. Attendance in the half grew 10.2% over the prior year comparable period, including the impact of the WW Group, San Diego and North Carolina franchise acquisitions, which

were not owned during the first half of 2002. On an organic basis, NACO attendance declined 1.5% as a result of severe winter weather and the war impact early in the period, a shortened spring diet season because of a late Easter, the planned delay of the NACO program innovation launch from January to late summer 2003, and intensified promotion in the summer of "low-carb/high-fat" self-help diets.

International company-owned classroom meeting fees were $116.0 million for the six months ended June 28, 2003, an increase of $28.7 million, or 32.9%, from $87.3 million for the six months ended June 29, 2002. International meeting fees grew 13.5% on a local currency basis on attendance growth of 9.0%. Recent innovations in Continental Europe (September 2002) and the UK (January 2003) were well received. Despite the impact of bad weather primarily in the UK during the first quarter of 2003, attendances grew 9.0% in the highly competitive UK market and 11.8% in Continental Europe in the first half of 2003 over the 2002 level.

Product sales were $156.7 million for the six months ended June 28, 2003, an increase of $28.1 million, or 21.9%, from $128.6 million for the six months ended June 29, 2002. Product sales increased 11.5% to $89.3 million domestically and 39.0% to $67.4 million internationally. Product sales increased as a result of attendance growth, and product sales per individual attendance grew in all geographies.

Franchise royalties were $11.5 million domestically and $3.4 million internationally for the six months ended June 28, 2003. In total, franchise royalties decreased $3.1 million, or 17.2%, from $18.0 million for the six months ended June 29, 2002, to $14.9 million for the comparable period this year. The decrease resulted primarily from two factors: the inclusion in the first half of 2002 of a one-time retroactive royalty payment, and the impact of having three fewer franchises in the first half of 2003 (San Diego and North Carolina were acquired by the Company during the second half of 2002 and the WW Group franchises were acquired in the second quarter of 2003).

Revenues from publications, licensing and other royalties were $16.6 million for the six months ended June 28, 2003, an increase of $8.5 million, or 104.9%, from $8.1 million for the six months ended June 29, 2002. Licensing royalty income from WeightWatchers.com increased by $1.8 million to $3.5 million. Increased advertising revenues accounted for $3.2 million and strong growth in international royalties from our publishing and licensing businesses accounted for the remainder of the increase.

Cost of revenues was $229.4 million for the six months ended June 28, 2003, an increase of $37.4 million, or 19.5%, from $192.0 million for the six months ended June 29, 2002. Gross profit margin was 55.0% of sales in the six months ended June 28, 2003, a slight decrease from the 55.4% level in last year's comparable period.

Marketing expenses increased $20.8 million, or 44.7%, to $67.3 million in the six months ended June 28, 2003 from $46.5 million in the six months ended June 29, 2002. As a percentage of net revenues, marketing expenses were 13.2% in the period versus 10.8% last year. In the first half of 2003, we increased our marketing investment in certain international geographies to increase brand awareness and spur growth, with good results. In addition, in NACO operations, we increased our advertising to support our Winning Points program now in its third year and extended our media campaign to counter the impact of unusually prolonged and intense bad weather during the first quarter of 2003.

Selling, general and administrative expenses were $36.6 million for the six months ended June 28, 2003, an increase of $6.3 million, or 20.8%, from $30.3 million for the six months ended June 29, 2002. Selling, general and administrative expenses increased as a result of currency translation, higher legal fees, normal increases for salaries and related expenses and higher insurance rates as well as for some staff increases to support growth areas of the business. Selling, general and administrative expenses as a percentage of revenues were 7.2% in the first half of 2003 nearly comparable to 7.0% in the first half of 2002.

Operating income was $177.0 million for the six months ended June 28, 2003, an increase of $15.4 million, or 9.5%, from $161.6 million for the six months ended June 29, 2002. The operating income margin in the first half of 2003 was 34.7%, down from 37.5% in the first half of 2002, as a result of our increased investment in marketing.

For the six months ended June 28, 2003, other expenses (income), net were $2.2 million expense, and includes a $5.0 million voluntary loan repayment from WeightWatchers.com, as compared to $12.2 million of expense for the six months ended June 29, 2002. In the first half of 2003, we recorded $7.8 million of unrealized currency losses on foreign currency denominated debt and other obligations net of hedges as compared to $10.0 million in the first half of 2002.

Liquidity and Capital Resource

For the six months ended June 28, 2003, cash and cash equivalents decreased $5.3 million to $52.2 million and cash flows provided by operating activities were $138.6 million. Funds were used for investing and financing activities as follows: Investing activities in the first half of 2003 totaled $179.4 million, comprised primarily of $181.5 million attributable to the acquisition of certain assets of the WW Group. Cash provided by financing activities totaled $35.3 million, which consisted of $47.3 million for repayment of principal on our outstanding Credit Facility offset by $85.0 million in proceeds from borrowings. Both the borrowing and the repayment exclude $15.0 million of revolver borrowing, which was immediately repaid.

For the six months ended June 29, 2002, cash and cash equivalents increased $33.0 million to $56.4 million and cash flows provided by operating activities were $113.0 million. Cash used for investing activities were $48.8 million and were primarily attributable to $46.5 million paid in connection with the acquisition of our North Jersey franchise and $2.1 million invested in capital expenditures. Cash used for financing activities included repayments of $66.1 million in principal on our Credit Facility, the repurchase of one million shares of our preferred stock held by Heinz for $25.0 million, and the cumulative final payment of $1.2 million of dividends on our preferred stock. In total, after proceeds from borrowings of $58.5 million, net cash used for financing activities totaled $33.4 million.

Working capital at June 28, 2003 was $9.0 million compared to $22.0 million at December 28, 2002. The change in working capital of $(13.0) million was primarily attributable to a decrease of $1.7 million in current assets, mainly driven by a $5.3 million decrease in cash, a $5.1 million decrease in inventory, offset by increases in net receivables of $6.5 million and prepaid expenses and other assets of $2.2 million. Current liabilities increased $11.3 million as a result of higher accrued taxes and interest payments, due to timing, and other accrued liabilities consistent with normal operations.

Our total debt was $502.3 million and $454.7 million at June 28, 2003 and December 28, 2002, respectively. We had $45.0 million in both periods available under our revolving credit facility.

Our debt consists of both fixed and variable-rate instruments. At June 28, 2003 and December 28, 2002, fixed-rate debt constituted approximately 52.6% and 56.0% of our total debt, respectively. The average interest rate on our debt was approximately 8.6% and 9.1% at June 28, 2003 and December 28, 2002, respectively.

Long-Term Debt

			As of June 28, 2003
			Balance		Interest Rate
			(in millions)
EURO 100.0 million 13% Senior Subordinated Notes Due 2009			$	114.3	13.00	%
US $150.0 million 13% Senior Subordinated Notes Due 2009				150.0	13.00	%
Term A Loan due 2005				32.8	3.03	%
Term B Loan due 2007				83.1	3.72	%
Term D Loan due 2008				72.8	3.73	%
Transferable Loan Certificate Due 2007				49.3	3.83	%

		Total Debt		502.3
	Less Current Portion			13.3

		Total Long-Term Debt	$	489.0

The following schedule sets forth our long-term debt obligations (and interest rates):

The term loan A facility, the term loan B facility, the term loan D facility, the transferable loan certificate facility and the revolving credit facility bear interest at a rate equal to (a) in the case of the term loan A facility and the revolving credit facility, LIBOR plus 1.75% or, at our option, the alternate base rate (as defined in the senior credit facilities) plus 0.75% and (b) in the case of the term loan B facility, the term loan D facility and the transferable loan certificate facility, LIBOR plus 2.50% or, at our option, the alternate base rate plus 1.50%. In addition to paying interest on outstanding principal under the senior credit facilities, we are required to pay a commitment fee to the lenders under the revolving credit facility with respect to the unused commitments at a rate equal to 0.50% per year.

Our senior credit facilities contain covenants that restrict our ability to incur additional indebtedness, pay dividends on and redeem capital stock, make other restricted payments, including investments, sell our assets and enter into consolidations, mergers and transfers of all or substantially all of our assets. Our senior credit facilities also require us to maintain specified financial ratios and satisfy financial condition tests.

Our obligations under the notes are subordinate and junior in right of payment to all of our existing and future senior indebtedness, including all indebtedness under the senior credit facilities. The indentures, pursuant to which the notes were issued, restrict our ability to incur additional indebtedness, issue preferred stock, pay dividends on and redeem capital stock, make other restricted payments, including investments, sell our assets and enter into consolidations, mergers and transfers of all or substantially all of our assets. We or our affiliates, including entities related to Artal Luxembourg, may from time to time, depending on market conditions purchase the notes in the open market or by other means.

During March 2003, both Moody's and Standard & Poor's upgraded our credit ratings. On March 11, 2003, Standard & Poor's upgraded its corporate credit and senior credit facility ratings from "BB-" to "BB" and upgraded its ratings for the senior subordinated notes from "B" to "B+". On March 20, 2003, Moody's upgraded its ratings for the senior subordinated notes from "Ba3" to "Ba2" and confirmed its "Ba1" rating for the credit facilities.

The following schedule sets forth our year-by-year long-term debt obligations:

Long-Term Debt Obligations
(Including Current Portion)

		As of June 28, 2003
		(in millions)
Remainder of 2003		$	10.0
2004			14.5
2005			14.0
2006			2.1
2007			128.1
Thereafter			333.6

	Total	$	502.3

Debt obligations due to be repaid in the next 12 months are expected to be satisfied with operating cash flows. We believe that cash flows from operating activities, together with borrowings available under our revolving credit facility, will be sufficient for the next 12 months to fund currently anticipated capital expenditure requirements, debt service requirements and working capital requirements.

On January 18, 2002, we completed the acquisition of the assets of our North Jersey franchise for a purchase price of $46.5 million. The acquisition was financed through additional borrowings from our senior credit facilities, which were subsequently repaid by the end of the second quarter of 2002.

On July 2, 2002, we completed the acquisition of the assets of our San Diego franchise for a purchase price of $11.0 million. The acquisition was financed through cash from operations.

On September 1, 2002, we completed the acquisition of the assets of our eastern North Carolina franchise for a purchase price of $10.6 million. The acquisition was financed through cash from operations.

On March 30, 2003, we completed the acquisition of the assets of eight of the franchises of the WW Group for a purchase price of $180.7 million. The acquisition was financed through cash from operations and through additional borrowings under our senior credit facilities (amended on April 1, 2003) of $85.0 million under a new Term Loan D.

On July 21, 2003, we commenced a cash tender offer and consent solicitation for all of our 150.0 million USD denominated and 100.0 million EUR denominated 13% Senior Subordinated Notes due 2009. The tender offer will expire on August 18, 2003. The consideration for the tender offer and consent solicitation will be funded from cash on hand and additional borrowings under the Credit Facility that will be refinanced, amended and restated in connection with the tender offer. In conjunction with the tender offer, we are soliciting consents to eliminate substantially all of the restrictive covenants and certain default provisions in the indentures pursuant to which the Notes were issued.

On July 30, 2003, we amended the tender offer by increasing the tender offer consideration and extending the consent date to 12:00 midnight, New York City time, on August 6, 2003. On August 7, 2003, we announced receipt of requisite consents and tenders for over 90% of our Senior Subordinated Notes.

Any future acquisitions, joint ventures or other similar transactions could require additional capital and we cannot be certain that any additional capital will be available on acceptable terms or at all. Our ability to fund our capital expenditure requirements, interest, principal and dividend payment

obligations and working capital requirements and to comply with all of the financial covenants under our debt agreements depends on our future operations, performance and cash flow. These are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control.

Off-Balance Sheet Transactions

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes, such as entities often referred to as structured finance or special purpose entities.

Related Party Transactions

For a discussion of related party transactions affecting us, see "Item 13. Certain Relationships and Related Transactions" beginning on page 37 of our Annual Report on Form 10-K for the fiscal year ended December 28, 2002. Other than during the normal course of business, the related party transactions affecting us have not changed since December 28, 2002.

Seasonality

Our business is seasonal, with revenues generally decreasing at year end and during the summer months. Our advertising schedule supports the three key enrollment-generating seasons of the year: winter, spring and fall. Due to the timing of our marketing expenditures, particularly the higher level of expenditures in the first quarter, our operating income for the second quarter is generally the strongest, with the fourth quarter being the weakest.

Accounting Standards

In April 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB No. 13 and Technical Corrections". SFAS No. 145 rescinds SFAS No. 4, which required all gains and losses from the extinguishment of debt to be classified as an extraordinary item, and amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The provisions of SFAS No. 145 were effective for us beginning December 29, 2002. The adoption of SFAS No. 145 did not have a material impact on our consolidated financial position, results of operations or cash flows.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of commitment to an exit or disposal plan. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material impact on our consolidated financial position, results of operations or cash flows.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". Interpretation No. 45 requires the disclosure of certain guarantees and requires the recognition of a liability for the fair value of the obligation of qualifying guarantee activities. We have applied the recognition provisions of Interpretation No. 45 to guarantee activities initiated after December 31, 2002. The adoption of Interpretation No. 45 did not have a material impact on our consolidated financial position, results of operations or cash flows.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities". Interpretation No. 46 requires that the assets, liabilities and results of the activity of variable interest entities be consolidated into the financial statements of the company that has the controlling financial interest. Interpretation No. 46 also provides the framework for determining whether a variable interest entity should be consolidated based on voting interest or significant financial support provided to it. Interpretation No. 46 became effective for us on February 1, 2003 for variable interest entities created after January 31, 2003, and on June 29, 2003 for variable interest entities created prior to February 1, 2003. The adoption of Interpretation No. 46 did not impact our consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure", an amendment of SFAS No. 123. SFAS No. 148 provides two additional alternative transition methods for recognizing an entity's voluntary decision to change its method of accounting for stock-based employee compensation to the fair value method. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 so that entities under the intrinsic value method of Accounting Principles Board Opinion ("APB") No. 25 will be required to disclose the pro forma effect of using the fair value method for any period for which an income statement is presented. The disclosures are required to be made in annual financial statements and in quarterly information provided to shareholders without regard to whether the entity has adopted SFAS No. 123 for recognition purposes. SFAS No. 148's transition guidance and provisions for annual disclosures are effective for fiscal years ending after December 15, 2002. We continue to apply the recognition and measurement principles of APB No. 25, "Accounting for Stock Issued to Employees", and related Interpretations in accounting for those plans. No compensation expense for employee stock options is reflected in earnings, as all options granted under the plans had an exercise price equal to the market value of the common stock on the date of grant.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments." This statement amends and clarifies financial accounting and reporting for derivative instruments including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement is effective for contracts entered into or modified after June 30, 2003 and hedging relationships designated after June 30, 2003. We will apply the provisions of SFAS No. 149 prospectively, however, we do not believe the adoption of SFAS No. 149 will have a material impact on our consolidated financial position, results of operations or cash flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Based on the overall interest rate exposure on our fixed rate borrowings at June 28, 2003, a 10% change in market interest rates would have less than a 5% impact on the fair value of our long-term debt. Based on variable rate debt levels at June 28, 2003, a 10% change in market interest rates would have less than a 5% impact on our net interest expense.

We use foreign currency forward contracts to more properly align the underlying sources of cash flow with our debt servicing requirements. At June 28, 2003, we had a long-term foreign currency forward contract receivable with a notional amount of Euro 74.0 million, offset by a foreign currency forward contract payable with a notional amount of $76.0 million.

For a more detailed discussion of our quantitative and qualitative disclosures about market risks that affect us, see Item 7A "Quantitative and Qualitative Disclosure About Market Risk" beginning on page 27 of our Annual Report on Form 10-K for the fiscal year ended December 28, 2002. Our exposure to market risks has not changed materially since December 28, 2002.

ITEM 4. CONTROLS AND PROCEDURES

Based on their evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded our disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934) are effective. There have been no changes in the Company's internal control over financial reporting or in other factors that materially affected or are reasonably likely to materially affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Nothing to report under this item.

ITEM 2. CHANGES IN SECURITIES

Nothing to report under this item.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Nothing to report under this item.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company's Annual Meeting of Shareholders was held on Monday, May 19, 2003 in Garden City, New York, at which time the following matters were submitted to a vote of the shareholders:

a): Votes regarding the election of three Directors for a term expiring in 2006 were as follows:

Term expiring in 2006	For	Withheld
Sacha Lainovic	97,553,030	1,153,929
Christopher J. Sobecki	97,552,961	1,153,998
Marsha Johnson Evans	97,385,504	1,321,455

: Additional Directors, whose terms of office as Directors continued after the meeting, are as follows:

		Term expiring in 2004
		Linda Huett
		Sam K. Reed
		Philippe J. Amouyal

		Term expiring in 2005
		Raymond Debbane
		Jonas M. Fajgenbaum
		John F. Bard

b): Votes regarding ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors of the Company for the fiscal year ending January 3, 2004 were as follows:

		For		Against		Abstentions		Non-votes
		97,902,734		800,033		4,192		0

ITEM 5. OTHER INFORMATION

Nothing to report under this item.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a): Exhibits

Exhibit 2.1		Asset Purchase Agreement, dated as of March 31, 2003, by and among the WW Group, The WW Group East L.L.C., The WW Group West L.L.C., Cuida Kilos, S.A. de C.V., Weight Watchers North America, Inc., and Weight Watchers International, Inc., (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K, filed April 16, 2003, and incorporated herein by reference).*
Exhibit 10.1		Amendment No. 4 to Credit Agreement, dated as of April 1, 2003, among Weight Watchers International, Inc., WW Funding Corp., and Various Financial Institutions, as the Lenders (with annexed Third Amended and Restated Credit Agreement, dated as of April 1, 2003 among Weight Watchers International, Inc., WW Funding Corp., Various Financial Institutions, as the Lenders, Credit Suisse First Boston, BHF (USA) Capital Corporation, Fortis (USA) Finance LLC and The Bank of Nova Scotia) (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed April 16, 2003, and incorporated herein by reference).*
Exhibit 31.1		Certification pursuant to Exchange Act Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
Exhibit 31.2		Certification pursuant to Exchange Act Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
Exhibit 32		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
Exhibit 32		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

*

previously filed

filed herewith

(b): Reports on Form 8-K

On April 15, 2003, the Company filed a Report on Form 8-K to report under Item 2. Acquisition of Assets, related to the acquisition of eight of the Weight Watchers franchises and certain other business assets of the WW Group.

On June 13, 2003, the Company filed a Report on Form 8-K/A as an amendment to Form 8-K filed on April 15, 2003 to report under Item 7. Financial Statements and Exhibits, certain supplemental financial information in connection with the WW Group acquisition.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 12, 2003		By:	/s/ LINDA HUETT Linda Huett President, Chief Executive Officer and Director (Principal Executive Officer)
Date: August 12, 2003		By:	/s/ ANN M. SARDINI Ann M. Sardini Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

EXHIBIT INDEX

Exhibit Number		Description
Exhibit 2.1		Asset Purchase Agreement, dated as of March 31, 2003, by and among the WW Group, the WW Group East L.L.C., The WW Group West L.L.C., Cuida Kilos, S.A. de C.V., Weight Watchers North America, Inc., and Weight Watchers International, Inc., (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K, filed April 16, 2003, and incorporated herein by reference).*
Exhibit 10.1		Amendment No. 4 to Credit Agreement, dated as of April 1, 2003, among Weight Watchers International, Inc., WW Funding Corp., and Various Financial Institutions, as the Lenders (with annexed Third Amended and Restated Credit Agreement, dated as of April 1, 2003 among Weight Watchers International, Inc., WW Funding Corp., Various Financial Institutions, as the Lenders, Credit Suisse First Boston, BHF (USA) Capital Corporation, Fortis (USA) Finance LLC and The Bank of Nova Scotia) (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed April 16, 2003, and incorporated herein by reference).*
Exhibit 31.1		Certification pursuant to Exchange Act Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
Exhibit 31.2		Certification pursuant to Exchange Act Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
Exhibit 32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
Exhibit 32.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

*: previously filed
**: filed herewith

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES INDEX

ITEM I. FINANCIAL STATEMENTS

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4. CONTROLS AND PROCEDURES

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 2. CHANGES IN SECURITIES

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURES
EXHIBIT INDEX