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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q  

 

(Mark One)

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

For the quarterly period ended September 26, 2020

OR

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

For the transition period from              to             

Commission File Number: 001-16769

 

WW 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.)

675 Avenue of the Americas, 6th Floor, New York, New York 10010

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (212589-2700

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

WW

The Nasdaq Stock Market LLC

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

 

 

Non-accelerated filer

 

☐ 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

 

 

The number of shares of common stock outstanding as of October 22, 2020 was 68,093,574.

 

 

 


 

WW INTERNATIONAL, INC.

TABLE OF CONTENTS

 

 

 

Page No.

 

 

 

PART I—FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.     

Financial Statements

 

2

 

 

 

 

 

Unaudited Consolidated Balance Sheets at September 26, 2020 and December 28, 2019

 

2

 

 

 

 

 

Unaudited Consolidated Statements of Net Income for the three and nine months ended September 26, 2020 and September 28, 2019

 

3

 

 

 

 

 

Unaudited Consolidated Statements of Comprehensive Income for the three and nine months ended September 26, 2020 and September 28, 2019

 

4

 

 

 

 

 

Unaudited Consolidated Statements of Changes in Total Deficit for the three and nine months ended September 26, 2020 and September 28, 2019

 

5

 

 

 

 

 

Unaudited Consolidated Statements of Cash Flows for the nine months ended September 26, 2020 and September 28, 2019

 

7

 

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

 

8

 

 

 

Cautionary Notice Regarding Forward-Looking Statements

 

27

 

 

 

 

Item 2.     

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

29

 

 

 

 

Item 3.     

Quantitative and Qualitative Disclosures About Market Risk

 

55

 

 

 

 

Item 4.     

Controls and Procedures

 

55

 

 

 

PART II—OTHER INFORMATION

 

 

 

 

 

 

Item 1.     

Legal Proceedings

 

56

 

 

 

 

Item 1A.     

Risk Factors

 

56

 

 

 

 

Item 2.     

Unregistered Sales of Equity Securities and Use of Proceeds

 

58

 

 

 

 

Item 3.     

Defaults Upon Senior Securities

 

58

 

 

 

 

Item 4.     

Mine Safety Disclosures

 

58

 

 

 

 

Item 5.     

Other Information

 

58

 

 

 

 

Item 6.     

Exhibits

 

59

 

 

 

Signatures

 

60

 

 

 


PART I—FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

WW INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS AT

(IN THOUSANDS)

 

 

 

September 26,

 

 

December 28,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

204,397

 

 

$

182,736

 

Receivables (net of allowances: September 26, 2020 - $2,003 and

   December 28, 2019 - $1,813)

 

 

36,377

 

 

 

30,519

 

Inventories

 

 

33,298

 

 

 

27,204

 

Prepaid income taxes

 

 

20,783

 

 

 

8,395

 

Prepaid marketing and advertising

 

 

3,751

 

 

 

15,954

 

Prepaid expenses and other current assets

 

 

22,798

 

 

 

30,582

 

TOTAL CURRENT ASSETS

 

 

321,404

 

 

 

295,390

 

Property and equipment, net

 

 

57,306

 

 

 

54,066

 

Operating lease assets

 

 

131,777

 

 

 

151,983

 

Franchise rights acquired

 

 

751,664

 

 

 

753,445

 

Goodwill

 

 

152,791

 

 

 

157,916

 

Other intangible assets, net

 

 

59,606

 

 

 

59,031

 

Deferred income taxes

 

 

12,487

 

 

 

14,319

 

Other noncurrent assets

 

 

15,974

 

 

 

12,164

 

TOTAL ASSETS

 

$

1,503,009

 

 

$

1,498,314

 

LIABILITIES AND TOTAL DEFICIT

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Portion of long-term debt due within one year

 

$

96,250

 

 

$

96,250

 

Portion of operating lease liabilities due within one year

 

 

35,101

 

 

 

33,236

 

Accounts payable

 

 

27,565

 

 

 

29,064

 

Salaries and wages payable

 

 

50,781

 

 

 

66,656

 

Accrued marketing and advertising

 

 

8,561

 

 

 

14,815

 

Accrued interest

 

 

14,343

 

 

 

24,637

 

Other accrued liabilities

 

 

45,387

 

 

 

43,558

 

Derivative payable

 

 

32,542

 

 

 

21,597

 

Income taxes payable

 

 

5,807

 

 

 

3,644

 

Deferred revenue

 

 

48,012

 

 

 

60,613

 

TOTAL CURRENT LIABILITIES

 

 

364,349

 

 

 

394,070

 

Long-term debt, net

 

 

1,426,580

 

 

 

1,479,920

 

Long-term operating lease liabilities

 

 

110,034

 

 

 

128,464

 

Deferred income taxes

 

 

175,938

 

 

 

175,235

 

Other

 

 

7,259

 

 

 

2,446

 

TOTAL LIABILITIES

 

 

2,084,160

 

 

 

2,180,135

 

Redeemable noncontrolling interest

 

 

3,599

 

 

 

3,722

 

TOTAL DEFICIT

 

 

 

 

 

 

 

 

Common stock, $0 par value; 1,000,000 shares authorized; 120,649 shares

   issued at September 26, 2020 and 120,352 shares issued at December 28, 2019

 

 

0

 

 

 

0

 

Treasury stock, at cost, 52,626 shares at September 26, 2020 and 52,933

   shares at December 28, 2019

 

 

(3,146,011

)

 

 

(3,158,274

)

Retained earnings

 

 

2,596,926

 

 

 

2,500,083

 

Accumulated other comprehensive loss

 

 

(35,665

)

 

 

(27,352

)

TOTAL DEFICIT

 

 

(584,750

)

 

 

(685,543

)

TOTAL LIABILITIES AND TOTAL DEFICIT

 

$

1,503,009

 

 

$

1,498,314

 

 

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

2


WW INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF NET INCOME

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 26,

 

 

September 28,

 

 

September 26,

 

 

September 28,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Service revenues, net

$

282,310

 

 

$

298,041

 

 

$

899,964

 

 

$

918,535

 

Product sales and other, net

 

38,389

 

 

 

50,526

 

 

 

154,733

 

 

 

162,219

 

Revenues, net

 

320,699

 

 

 

348,567

 

 

 

1,054,697

 

 

 

1,080,754

 

Cost of services

 

99,485

 

 

 

122,374

 

 

 

343,056

 

 

 

373,452

 

Cost of product sales and other

 

31,118

 

 

 

31,424

 

 

 

115,882

 

 

 

95,771

 

Cost of revenues

 

130,603

 

 

 

153,798

 

 

 

458,938

 

 

 

469,223

 

Gross profit

 

190,096

 

 

 

194,769

 

 

 

595,759

 

 

 

611,531

 

Marketing expenses

 

38,262

 

 

 

36,327

 

 

 

198,090

 

 

 

200,543

 

Selling, general and administrative expenses

 

59,192

 

 

 

63,713

 

 

 

225,509

 

 

 

188,889

 

Goodwill impairment

 

0

 

 

 

0

 

 

 

3,665

 

 

 

0

 

Operating income

 

92,642

 

 

 

94,729

 

 

 

168,495

 

 

 

222,099

 

Interest expense

 

29,735

 

 

 

33,118

 

 

 

92,281

 

 

 

103,045

 

Other (income) expense, net

 

(211

)

 

 

1,460

 

 

 

230

 

 

 

2,201

 

Income before income taxes

 

63,118

 

 

 

60,151

 

 

 

75,984

 

 

 

116,853

 

Provision for income taxes

 

8,604

 

 

 

13,123

 

 

 

13,546

 

 

 

26,834

 

Net income

 

54,514

 

 

 

47,028

 

 

 

62,438

 

 

 

90,019

 

Net loss attributable to the noncontrolling interest

 

11

 

 

 

58

 

 

 

30

 

 

 

214

 

Net income attributable to WW International, Inc.

$

54,525

 

 

$

47,086

 

 

$

62,468

 

 

$

90,233

 

Earnings per share attributable to WW International, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.80

 

 

$

0.70

 

 

$

0.92

 

 

$

1.34

 

Diluted

$

0.78

 

 

$

0.68

 

 

$

0.89

 

 

$

1.30

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

68,013

 

 

 

67,298

 

 

 

67,697

 

 

 

67,129

 

Diluted

 

70,002

 

 

 

69,617

 

 

 

69,936

 

 

 

69,364

 

 

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

3


WW INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(IN THOUSANDS)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 26,

 

 

September 28,

 

 

September 26,

 

 

September 28,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income

$

54,514

 

 

$

47,028

 

 

$

62,438

 

 

$

90,019

 

Other comprehensive gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation gain (loss)

 

4,004

 

 

 

(2,983

)

 

 

(827

)

 

 

532

 

Income tax (expense) benefit on foreign currency

   translation gain (loss)

 

(1,017

)

 

 

757

 

 

 

215

 

 

 

(135

)

Foreign currency translation gain (loss), net of taxes

 

2,987

 

 

 

(2,226

)

 

 

(612

)

 

 

397

 

Gain (loss) on derivatives

 

2,125

 

 

 

(4,251

)

 

 

(10,467

)

 

 

(22,431

)

Income tax (expense) benefit on gain (loss) on

   derivatives

 

(541

)

 

 

1,078

 

 

 

2,673

 

 

 

5,689

 

Gain (loss) on derivatives, net of taxes

 

1,584

 

 

 

(3,173

)

 

 

(7,794

)

 

 

(16,742

)

Total other comprehensive gain (loss)

 

4,571

 

 

 

(5,399

)

 

 

(8,406

)

 

 

(16,345

)

Comprehensive income

 

59,085

 

 

 

41,629

 

 

 

54,032

 

 

 

73,674

 

Net loss attributable to the noncontrolling interest

 

11

 

 

 

58

 

 

 

30

 

 

 

214

 

Foreign currency translation (gain) loss, net of taxes

   attributable to the noncontrolling interest

 

(1

)

 

 

44

 

 

 

93

 

 

 

38

 

Comprehensive loss attributable to the noncontrolling

   interest

 

10

 

 

 

102

 

 

 

123

 

 

 

252

 

Comprehensive income attributable to

   WW International, Inc.

$

59,095

 

 

$

41,731

 

 

$

54,155

 

 

$

73,926

 

 

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

4


WW INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED Consolidated Statements of Changes in Total Deficit

(IN THOUSANDS)

 

 

 

 

 

 

 

 

 

WW International, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Three Months Ended September 26, 2020

 

Noncontrolling

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Comprehensive

 

 

Retained

 

 

 

 

 

 

 

Interest

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Loss

 

 

Earnings

 

 

Total

 

Balance at June 27, 2020

 

$

3,609

 

 

 

 

120,649

 

 

$

0

 

 

 

52,669

 

 

$

(3,147,758

)

 

$

(40,235

)

 

$

2,538,840

 

 

$

(649,153

)

Comprehensive income (loss)

 

 

(10

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,570

 

 

 

54,525

 

 

 

59,095

 

Issuance of treasury stock under

   stock plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(43

)

 

 

1,747

 

 

 

 

 

 

 

(2,468

)

 

 

(721

)

Compensation expense on share-

   based awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,029

 

 

 

6,029

 

Balance at September 26, 2020

 

$

3,599

 

 

 

 

120,649

 

 

$

0

 

 

 

52,626

 

 

$

(3,146,011

)

 

$

(35,665

)

 

$

2,596,926

 

 

$

(584,750

)

 

 

 

 

 

 

 

 

 

 

WW International, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Nine Months Ended September 26, 2020

 

Noncontrolling

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Comprehensive

 

 

Retained

 

 

 

 

 

 

 

Interest

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Loss

 

 

Earnings

 

 

Total

 

Balance at December 28, 2019

 

$

3,722

 

 

 

 

120,352

 

 

$

0

 

 

 

52,933

 

 

$

(3,158,274

)

 

$

(27,352

)

 

$

2,500,083

 

 

$

(685,543

)

Comprehensive income (loss)

 

 

(123

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,313