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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 April 3, 2021

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 April 28, 2021 was 69,520,571.

 

 

 


 

 

 

WW INTERNATIONAL, INC.

TABLE OF CONTENTS

 

 

 

Page No.

 

 

 

PART I—FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.     

Financial Statements

 

2

 

 

 

 

 

Unaudited Consolidated Balance Sheets at April 3, 2021 and January 2, 2021

 

2

 

 

 

 

 

Unaudited Consolidated Statements of Net Income for the three months ended April 3, 2021 and March 28, 2020

 

3

 

 

 

 

 

Unaudited Consolidated Statements of Comprehensive Income for the three months ended April 3, 2021 and March 28, 2020

 

4

 

 

 

 

 

Unaudited Consolidated Statements of Changes in Total Deficit for the three months ended April 3, 2021 and March 28, 2020

 

5

 

 

 

 

 

Unaudited Consolidated Statements of Cash Flows for the three months ended April 3, 2021 and March 28, 2020

 

6

 

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

 

7

 

 

 

Cautionary Notice Regarding Forward-Looking Statements

 

23

 

 

 

 

Item 2.     

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

 

25

 

 

 

 

Item 3.     

Quantitative and Qualitative Disclosures About Market Risk

 

43

 

 

 

 

Item 4.     

Controls and Procedures

 

43

 

 

 

PART II—OTHER INFORMATION

 

 

 

 

 

 

Item 1.     

Legal Proceedings

 

44

 

 

 

 

Item 1A.     

Risk Factors

 

44

 

 

 

 

Item 2.     

Unregistered Sales of Equity Securities and Use of Proceeds

 

44

 

 

 

 

Item 3.     

Defaults Upon Senior Securities

 

44

 

 

 

 

Item 4.     

Mine Safety Disclosures

 

44

 

 

 

 

Item 5.     

Other Information

 

44

 

 

 

 

Item 6.     

Exhibits

 

45

 

 

 

Signatures

 

46

 

 

 


 

 

PART I—FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

WW INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS AT

(IN THOUSANDS)

 

 

 

April 3,

 

 

January 2,

 

 

 

2021

 

 

2021

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

113,313

 

 

$

165,887

 

Receivables (net of allowances: April 3, 2021 - $2,211 and

   January 2, 2021 - $2,298)

 

 

39,889

 

 

 

34,555

 

Inventories

 

 

34,369

 

 

 

39,456

 

Prepaid income taxes

 

 

31,079

 

 

 

20,028

 

Prepaid marketing and advertising

 

 

6,344

 

 

 

15,656

 

Prepaid expenses and other current assets

 

 

26,182

 

 

 

23,610

 

TOTAL CURRENT ASSETS

 

 

251,176

 

 

 

299,192

 

Property and equipment, net

 

 

46,893

 

 

 

51,935

 

Operating lease assets

 

 

108,138

 

 

 

119,102

 

Franchise rights acquired

 

 

786,371

 

 

 

765,850

 

Goodwill

 

 

155,781

 

 

 

155,617

 

Other intangible assets, net

 

 

59,468

 

 

 

59,709

 

Deferred income taxes

 

 

13,045

 

 

 

13,625

 

Other noncurrent assets

 

 

15,502

 

 

 

16,144

 

TOTAL ASSETS

 

$

1,436,374

 

 

$

1,481,174

 

LIABILITIES AND TOTAL DEFICIT

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Portion of long-term debt due within one year

 

$

77,000

 

 

$

77,000

 

Portion of operating lease liabilities due within one year

 

 

24,045

 

 

 

28,551

 

Accounts payable

 

 

21,030

 

 

 

23,052

 

Salaries and wages payable

 

 

60,483

 

 

 

58,047

 

Accrued marketing and advertising

 

 

10,070

 

 

 

15,556

 

Accrued interest

 

 

9,352

 

 

 

2,710

 

Other accrued liabilities

 

 

48,145

 

 

 

48,615

 

Derivative payable

 

 

23,053

 

 

 

28,283

 

Income taxes payable

 

 

4,132

 

 

 

7,810

 

Deferred revenue

 

 

50,016

 

 

 

50,475

 

TOTAL CURRENT LIABILITIES

 

 

327,326

 

 

 

340,099

 

Long-term debt, net

 

 

1,391,019

 

 

 

1,408,800

 

Long-term operating lease liabilities

 

 

93,552

 

 

 

101,561

 

Deferred income taxes

 

 

172,765

 

 

 

173,713

 

Other

 

 

7,490

 

 

 

5,212

 

TOTAL LIABILITIES

 

 

1,992,152

 

 

 

2,029,385

 

TOTAL DEFICIT

 

 

 

 

 

 

 

 

Common stock, $0 par value; 1,000,000 shares authorized; 121,801

   shares issued at April 3, 2021 and 121,470 shares issued at

   January 2, 2021

 

 

0

 

 

 

0

 

Treasury stock, at cost, 52,471 shares at April 3, 2021 and 52,497

   shares at January 2, 2021

 

 

(3,139,855

)

 

 

(3,140,903

)

Retained earnings

 

 

2,606,171

 

 

 

2,617,841

 

Accumulated other comprehensive loss

 

 

(22,094

)

 

 

(25,149

)

TOTAL DEFICIT

 

 

(555,778

)

 

 

(548,211

)

TOTAL LIABILITIES AND TOTAL DEFICIT

 

$

1,436,374

 

 

$

1,481,174

 

 

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

 

 

 

April 3,

 

 

March 28,

 

 

 

2021

 

 

2020

 

Subscription revenues, net

 

$

279,820

 

 

$

324,657

 

Product sales and other, net

 

 

51,976

 

 

 

75,704

 

Revenues, net

 

 

331,796

 

 

 

400,361

 

Cost of subscription revenues

 

 

99,103

 

 

 

135,566

 

Cost of product sales and other

 

 

39,258

 

 

 

53,804

 

Cost of revenues

 

 

138,361

 

 

 

189,370

 

Gross profit

 

 

193,435

 

 

 

210,991

 

Marketing expenses

 

 

116,933

 

 

 

117,933

 

Selling, general and administrative expenses

 

 

73,671

 

 

 

64,526

 

Goodwill impairment

 

 

 

 

 

3,665

 

Operating income

 

 

2,831

 

 

 

24,867

 

Interest expense

 

 

29,123

 

 

 

31,551

 

Other (income) expense, net

 

 

(237

)

 

 

24

 

Loss before income taxes

 

 

(26,055

)

 

 

(6,708

)

Benefit from income taxes

 

 

(7,828

)

 

 

(651

)

Net loss

 

 

(18,227

)

 

 

(6,057

)

Net income attributable to the noncontrolling interest

 

 

 

 

 

(6

)

Net loss attributable to WW International, Inc.

 

$

(18,227

)

 

$

(6,063

)

Net loss per share attributable to WW International, Inc.

 

 

 

 

 

 

 

 

Basic

 

$

(0.26

)

 

$

(0.09

)

Diluted

 

$

(0.26

)

 

$

(0.09

)

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

69,084

 

 

 

67,436

 

Diluted

 

 

69,084

 

 

 

67,436

 

 

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

 

 

 

April 3,

 

 

March 28,

 

 

 

2021

 

 

2020

 

Net loss

 

$

(18,227

)

 

$

(6,057

)

Other comprehensive gain (loss):

 

 

 

 

 

 

 

 

Foreign currency translation loss

 

 

(1,120

)

 

 

(9,820

)

Income tax benefit on foreign currency translation loss

 

 

282

 

 

 

2,499

 

Foreign currency translation loss, net of taxes

 

 

(838

)

 

 

(7,321

)

Gain (loss) on derivatives

 

 

5,204

 

 

 

(12,956

)

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

 

 

(1,311

)

 

 

3,305

 

Gain (loss) on derivatives, net of taxes

 

 

3,893

 

 

 

(9,651

)

Total other comprehensive gain (loss)

 

 

3,055

 

 

 

(16,972

)

Comprehensive loss

 

 

(15,172

)

 

 

(23,029

)

Net income attributable to the noncontrolling interest

 

 

 

 

 

(6

)

Foreign currency translation loss, net of taxes

   attributable to the noncontrolling interest

 

 

 

 

 

98

 

Comprehensive loss attributable to the noncontrolling interest

 

 

 

 

 

92

 

Comprehensive loss attributable to WW International, Inc.

 

$

(15,172

)

 

$

(22,937

)

 

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 April 3, 2021

 

Noncontrolling

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Comprehensive

 

 

Retained

 

 

 

 

 

 

 

Interest

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Loss

 

 

Earnings

 

 

Total

 

Balance at January 2, 2021

 

$

 

 

 

 

121,470

 

 

$

0

 

 

 

52,497

 

 

$

(3,140,903

)

 

$

(25,149

)

 

$

2,617,841

 

 

$

(548,211

)

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,055

 

 

 

(18,227

)

 

 

(15,172

)

Issuance of treasury stock under

   stock plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26

)

 

 

1,048

 

 

 

 

 

 

 

(1,083

)

 

 

(35

)

Compensation expense on share-

   based awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,340

 

 

 

5,340

 

Issuance of common stock

 

 

 

 

 

 

 

331

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,300

 

 

 

2,300

 

Balance at April 3, 2021

 

$

 

 

 

 

121,801

 

 

$

0

 

 

 

52,471

 

 

$

(3,139,855

)

 

$

(22,094

)

 

$

2,606,171

 

 

$

(555,778

)

 

 

 

 

 

 

 

 

 

WW International, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Three Months Ended March 28, 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 loss

 

 

(92

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,874

)

 

 

(6,063

)

 

 

(22,937

)

Issuance of treasury stock under

   stock plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34

)

 

 

1,367

 

 

 

 

 

 

 

(1,325

)

 

 

42

 

Compensation expense on share-

   based awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,965

 

 

 

3,965

 

Balance at March 28, 2020

 

$

3,630

 

 

 

 

120,352

 

 

$

0

 

 

 

52,899

 

 

$

(3,156,907

)

 

$

(44,226

)

 

$

2,496,660

 

 

$

(704,473

)

 

 

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

5


 

WW INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

 

 

 

Three Months Ended

 

 

 

April 3,

 

 

March 28,

 

 

 

2021

 

 

2020

 

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(18,227

)

 

$

(6,057

)

Adjustments to reconcile net loss to cash (used for) provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

13,180

 

 

 

12,211

 

Amortization of deferred financing costs and debt discount

 

 

2,231

 

 

 

2,184

 

Goodwill impairment

 

 

 

 

 

3,665

 

Impairment of intangible and long-lived assets

 

 

184

 

 

 

 

Share-based compensation expense

 

 

5,341

 

 

 

3,965

 

Deferred tax (benefit) provision

 

 

(1,361

)

 

 

14,624

 

Allowance for doubtful accounts

 

 

(12

)

 

 

(221

)

Reserve for inventory obsolescence

 

 

2,416

 

 

 

2,664

 

Foreign currency exchange rate (gain) loss

 

 

(372

)

 

 

916

 

Changes in cash due to:

 

 

 

 

 

 

 

 

Receivables

 

 

(6,008

)

 

 

(12,275

)

Inventories

 

 

2,792

 

 

 

(9,690

)

Prepaid expenses

 

 

(4,313

)

 

 

(9,287

)

Accounts payable

 

 

(842

)

 

 

15,400

 

Accrued liabilities

 

 

(1,756

)

 

 

(6,799

)

Deferred revenue

 

 

(211

)

 

 

(487

)

Other long term assets and liabilities, net

 

 

(738

)

 

 

(384

)

Income taxes

 

 

(4,182

)

 

 

(2,013

)

Cash (used for) provided by operating activities

 

 

(11,878

)

 

 

8,416

 

Investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(688

)

 

 

(13,533

)

Capitalized software expenditures

 

 

(9,447

)

 

 

(7,330

)

Cash paid for acquisitions

 

 

(10,849

)

 

 

 

Other items, net

 

 

(16

)

 

 

(5,051

)

Cash used for investing activities

 

 

(21,000

)

 

 

(25,914

)

Financing activities:

 

 

 

 

 

 

 

 

Net borrowings on revolver

 

 

 

 

 

148,000

 

Payments on long-term debt

 

 

(19,250

)

 

 

(19,250

)

Taxes paid related to net share settlement of equity awards

 

 

(237

)

 

 

(600

)

Proceeds from stock options exercised

 

 

2,468

 

 

 

120

 

Other items, net

 

 

(43

)

 

 

(64

)

Cash (used for) provided by financing activities

 

 

(17,062

)

 

 

128,206

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(2,634

)

 

 

(1,171

)

Net (decrease) increase in cash and cash equivalents

 

 

(52,574

)

 

 

109,537

 

Cash and cash equivalents, beginning of period

 

 

165,887

 

 

 

182,736