WW International Inc (WW) 2004 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen.

And welcome to your Weight Watchers International second quarter 2004 earnings conference call.

At this time, all participants have been placed on a listen-only mode and the floor will be open for questions following today's presentation.

It is now my pleasure to turn the floor over to your host, John Sweeney.

Sir, the floor is yours.

Thank you, Ashley and thank you to everyone for joining us today for the Weight Watchers International second quarter conference call.

With us on the call are Linda Huett, President and Chief Executive Officer, and Ann Sardini, Chief Financial Officer.

At about 4:00 p.m.

Eastern Time today, the Company issued a press release containing the financial results for the second quarter of fiscal year 2004.

The purpose of this call is to provide investors with some further details regarding these results and a general update in the Company's progress.

The press release is available at www.weightwatchersinternational. com.

Before we begin, let me remind everyone that this call will contain forward-looking statements, investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could -- that could cause actual results to differ materially from those discussed here today.

These risks factors are explained in detail in the Company's filings with the Securities and Exchange Commission.

The Company does not undertake any obligations to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

I would now like to turn the call over to Linda Huett, please go ahead, Linda.

Thank you, John.

Good afternoon and thank you for joining us as we review Weight Watchers International's performance for the quarter ended July 3, 2004.

I will discuss our business performance in our various geographical markets and update you on the status of several initiatives we have under way.

Ann we'll then review our financial results for the quarter and finally we will answer questions from the financial community.

Let me start by reminding you that we have adopted the accounting standard FIN 46 R at the end of the first quarter of this year.

As a result, for financial reporting purposes, we are required as of this quarter to consolidate the results of our affiliate and licensee, Weightwatchers.com, Inc. with our own.

Therefore, for the first time, this quarter's GAAP financial results include the operating results of Weightwatchers.com.

As I mentioned previously, Weightwatchers.com was founded as a separate company in September, 1999.

In 2001, it launched its subscription products, Weight Watchers e-tools for our members and Weight Watchers online, a self-help product.

From this standing start, Weight Watchers.com has become the leading online weight loss company with double the revenues of its nearest online competitor.

And while its nearest competitor had a operating loss of $5.5 million in quarter 2 of 2004, Weight Watchers.com had a positive operating income of $4.5 million this quarter.

It currently operates web sites in 27 countries, offering subscription products in 4 countries and is making significant investments in additional global expansion.

Weightwatchers.com has built its business by embracing the Weight Watchers mission to help individuals succeed in their weight management journey.

Their significant investment in product development translates into very high subscriber satisfaction and high subscriber retention.

It also invests heavily on online marketing, leveraging and reinforcing the overall Weight Watchers brand.

As Ann will explain in more detail, the consolidation of Weightwatchers.com, following the adoption of FIN 46 R, contributed $20 million to our reported revenues and 3 cents to our EPS this quarter.

From an economic perspective, despite this required accounting consolidation, nothing else has changed.

Weightwatchers.com is still a private company, separate from Weight Watchers International.

It is managed independently and we continue to maintain our minority ownership interest. 20% on an issued and outstanding basis and 37% on a fully diluted basis.

In my comments today and on future calls, I will focus on the operating results of Weight Watchers International without the accounting impact of FIN 46 R.

So, during the quarter, we continued to experience significant year-over-year softness in our North American business, partially offset by the solid performance of our international publishing and licensing operations.

Total revenue for the quarter declined 5.4% to $244.9 million from $558.9 million the previous year.

Total attendance at Company-owned operations during the quarter was 15.5 million.

A 7.1% decrease over last year.

Our second quarter operating income was $82.5 million, a 15% decline versus prior.

Operating margins declined from last year's 37.7% to 33.7 this year.

In a minute Ann will provide you with more details.

For the quarter, again without the impact of FIN 46 R, our fully diluted earnings per share were 46 cents compared to 49 cents in prior year.

I would now like to provide some detail on each of our major geographies.

First, North America.

In this year's second quarter, total NACO attendance declined 14.6% to 8.3 million from 9.7 million last year.

On an organic basis, the decline was 16.7%.

This decline was the result of weak recruitment levels that have been continuing at roughly the same levels relative to last year since the end of our January promotion.

This quarter's year-over-year decline was somewhat worse than the low teens decline we were expecting at the time of our last conference call.

We didn't see the improvement against last year that we had anticipated in the second half of the quarter.

At our last quarterly call in May, I shared with you our opinion that low carb dieting craze was past its peak, as low-carb dieters had begun to realize that it is not a sustainable weight loss method.

But I also said that the launch of hundreds of low-carb foods, supported by hundreds of millions in marketing dollars, would extend the duration of the low-carb phenomenon.

I explained that in the short-term, the proliferation of low-carb foods was causing a significant number of overweight people to move away from structured, calorie-restricting weight loss programs and to diet by eating only low-carb foods.

I also said that in the longer term, all of these low-carb foods would reinforce the low-carb decline by undercutting the mechanism by which low-carb diets initially worked, controlling calories by severely limiting food selection.

Today, evidence of this decline is being widely publicized in numerous surveys and disclosures.

A number of independent surveys have reported a decline in low-carb dieters and several major food companies who had jumped on the low-carb bandwagon are indicating that that craze is already exhausting itself.

However, while surveys show the number of low-carb dieters is declining, from a year-over-year perspective, there are still considerably more people on low-carb diets and eating low-carb foods today than there were at the same time last year.

According to a Morgan Stanley survey, the percentage of U.S. adult population on a low-carb diet in quarter 2 was about 10%, more than double last year's level at this time.

This report forecasts year-over-year comparables to turn negative only by quarter 4 of this year.

Although this craze has hurt our business in the short-term, it has also brought a significant number of new people into the dieting arena.

And more and more of them become disillusioned with the low-carb diets, one might expect them to immediately shift to a sensible and healthy dieting method, such as Weight Watchers.

But that's not the reality of dieting.

Unlike with a food product, where people have to eat every day and the decline in the volume of one category,of one product means the immediate volume increase in another, people disillusioned with a dieting method don't immediately start on another one.

In fact, they're likely to stop dieting for a while.

People need to be motivated positively, not negatively, in order to embark on a new weight loss journey.

In addition, there is also an established seasonality in our business for when to communicate effectively with consumers.

This is why we're looking forward to our upcoming program innovation, which we believe will deliver a very powerful positive message.

As I indicated in our last call, we were so excited about the new insight we gained from our consumer research last year that we decided to move you our U.S. amortization timing by more than a full year to later this month.

This launch will correspond with the beginning of our upcoming fall diet season and will be supported by an entirely new marketing campaign, leveraging our extensive consumer research on marketing effectiveness that I mentioned in our last call.

We're not prepared to reveal the details of this innovation today as we don't want to preempt our consumer communication efforts.

What I can say is that I am extremely proud of the work the team has done on this innovation, and I believe it will provide the positive message that consumers are waiting for.

While expanding the audience of people who will find a healthy, sustainable weight loss solution with Weight Watchers.

Because of the significance of this innovation, we have done a tremendous amount of testing on this new program.

Early this year we established 8 test centers around the country.

In fact, well over 10,000 members have tried a version of the new program.

The -- we tested the program on both health and satisfaction dimensions and the results have been exemplary.

Using the testers' experience we refined the program and we have rolled out, through the summer, a comprehensive training program for our field staff.

Our staff is extremely excited and looking forward to the launch.

Now, looking at quarter 3 for NACO, I believe that we will still report a year-over-year decline in attendance.

I expect it to be better than this quarter, in the low double digits.

This is the result of weak attendance flow into the summer and the fact that the new program innovation is being introduced well into the third quarter.

As the innovation builds and as the low-carb year over year comparables move toward a decline, I fully expect NACO to end this year with attendance levels running above those at the end of last year.

We will have weathered the largest dieting craze in a decade and we will be well-positioned to resume our long-term growth trajectory.

Now moving on to our international operations, the U.K. continues to lap the successful Time To Eat innovation it launched in January '03.

As anticipated, we had flat attendance at 3.6 million in quarter 2, and as I reported in our last call, we expect minimal volume growth in the U.K. market during this noninnovation year but we're looking forward to a successful launch of its major innovation in January of next year.

Continental Europe has continued its strong start to the year with attendance of 2.9 million, up 8.5% versus prior.

This performance continues to be powered by a strong growth in Germany.

Earlier this month, we began launching our new program innovation across most of our European markets.

Now, this innovation introduces 52 weeks of program material, which was such a successful element of the U.K.

Time To Eat innovation, plus it incorporates additional elements of personalization.

We expect this innovation to accelerate growth in continental Europe into the double digits by the end of the year.

Now on to other news: We have continued to purchase franchise territories and I'm pleased to announce that we have signed an agreement to acquire the Fort Worth franchise.

Ann will be giving you more details.

I'd like to take the opportunity to focus on our licensing business that continues to show excellent progress.

Our global licensing revenues, excluding royalties from Weightwatchers.com, were 3.3 million this quarter, an increase of 34% over last year.

As you know in May, Applebees launched a 10-item Weight Watchers menu in its over 1,600 restaurants.

They're very pleased as the menu items are performing even better than they did in the successful test markets before Christmas.

According to Applebees, guest feedback has been terrific and the restaurants have received good trial from both our members as well as an even broader population of health-conscious consumers.

Our bathroom scale licensee, Con Air, continues to perform well.

In just over a year since the initial launch, Can Air expects to have double-digit market share of the entire category.

Retailers from Bloomingdale's to Linens and Things to Wal-Marts are already selling Weight Watchers-branded scales.

On the packaged food front we have a number of exciting developments.

To remind you, as part of the original separation from Heinz, the packaged food area is divided between Heinz and Weight Watchers International.

Heinz has the royal free rights to use the Weight Watchers brand in their core categories, including frozen entrees, canned tuna, condiments, baked beans and a few others.

In certain markets in their -- and their core categories, Heinz has the right to use the Weight Watchers brand together with one of their own brands.

For example, in the U.K., Heinz uses Weight Watchers from Heinz.

In the U.S., it uses Weight Watchers Smart Ones.

Weight Watchers International has all the rights outside Heinz's core categories, except with regard to any pre-existing licensees where Heinz retained the economic rights for five years.

Now, this five-year transition period expires at the end of September this year, when the economic rights revert to Weight Watchers International.

We estimate that these new royalty streams will exceed $6 million on an annualized basis.

With regard to new licensees, since our separation, I believe we are off to an excellent start in building the Weight Watchers licensing business outside of Heinz core categories.

In the U.K., we have numerous licensees with a total of well over 100 SKUs under the stand-alone Weight Watchers brand.

In fact, Weight Watchers-branded products are now equal to the sales of Weight Watchers from Heinz products.

In Australia, we have a similarly successful range of Weight Watchers licensed products outside the core categories.

In the U.S., short shelf-life cakes and muffins have recently been introduced and launched under the Weight Watchers brand.

This new line has just started to appear at retail and early movement of the products is dramatically exceeding expectations.

We have also recently signed a license for breakfast cereals, this is an exciting new product category for Weight Watchers and will be launching in the U.S. later this year.

Finally, as I'm sure you have seen, we have signed a new license agreement for Weight Watchers ice cream in the U.S.

Because the prior Weight Watchers Smart Ones licensed to Cool Brands, International was an existing license at the time of our separation from Heinz, so far we have been receiving negligible royalties from this category.

As at the end of September, the Cool Brands license will have expired and on October 1, the Weight Watchers brand for the whole ice cream category will be licensed to Wells Dairy a, very well respected, privately-owned company and we will, of course, receive all of the royalties from this category.

Before turning over to Ann, I would also like to announce two senior appointments we have made in the last few years.

Years?

Weeks.

We are pleased to announce that Miriam Jordan Keane will be joining us as Weight Watchers's chief brand officer.

Miriam has over 20 years of advertising experience, most recently as a managing partner with Publicist, where she led the agency's specialist division, focusing on marketing to women.

We met Miriam, a successful Weight Watchers member, during our recent European ad agency review process.

Miriam impressed us with her grasp of the Weight Watchers brand and of our core consumer, while also displaying the creativity and experience I believe will be a catalyst for strengthening our marketing efforts around the globe.

I'm also very pleased to announce that Kevin Ebberly, Weightwatchers.com's Chief Marketing Officer, has joined Weight Watchers International, initially to focus on growing our high potential, North American corporate solutions business.

Kevin is a talented executive whom we know well.

Not only has he demonstrated excellent marketing and organization-building skills at dot-com, but he has also been responsible for managing and building sales and marketing organizations during his tenure with Kraft Nabisco and previously with Pepsico.

Corporate solutions is a recent initiative we launched to market to corporations the full breath of offerings that Weight Watchers has to reduce Corporations healthcare costs and to improve the well being of their employees.

These offerings include Weight Watchers at work meetings, Weight Watchers online and Weight Watchers at home.

Companies are increasingly interested in this type of service and I believe this opportunity has great potential to drive growth in the future.

Now I would like to turn the discussion over to Ann Sardini who will cover our financial results in more detail.

Thank you, Linda, and good afternoon, everyone.

As was discussed earlier, starting this quarter, we are consolidating the results of operations of Weightwatchers.com into our financial statements in accordance with the financial accounting standards board interpretation number 46-R.

FIN 46-R requires us to consolidate 100% of Weightwatchers.com for financial reporting purposes, despite having only a 20% stake in the Company.

From an accounting standpoint, this means that we will recognize 100% of Weightwatchers.com's profits until its cumulative losses are covered and at that point, we will continue to consolidate its revenues and expenses, but what will change is that we will reverse out the portion of the period profits that do not correspond to our percentage of ownership in the entity and majority interest line items.

In the first quarter of this year, in accordance with FIN 46-R, we recognized a one-time charge, line item cumulative effective accounting change of 11.9 million or 11 cents per share, to record the cumulative prior activity of Weightwatchers.com as if it had been consolidated from its inception date of September '99 through the end of the first quarter this year.

In the second quarter and thereafter, the consolidation takes the form of embedding Weightwatchers.com's operating results, net of intercompany transactions, into our own.

The major intercompany transactions which get reversed in consolidation include the royalty interest and principal payments which are made by Weightwatchers.com to Weight Watchers International and the service fees paid by us to the dot-com.

These items are eliminated as a matter of accounting only.

Operationally and economically, Weightwatchers.com continues to be our licensee and we each continue to operate in accordance with our licensing and service agreement.

For the second quarter 2004, Weight Watchers International's consolidated revenues were 264.9 million, including 20 million resulting from the consolidation.

Operating income of 87 million includes 4.5 million added in consolidation.

Net income on a consolidated basis, excluding all the intercompany transactions, was 52.9 million and EPS was 49 cents.

The consolidation of Weightwatchers.com added 3.6 million or 3 cents to EPS in the second quarter.

As we noted in our last conference call, it is our goal to present information on our conference calls and in our filings that will enable our shareholders to continue to understand the business performance of Weight Watchers International on a stand-alone basis.

The remainder of this financial discussion will address our business results, excluding any impact from the adoption of FIN 46-R and the consolidation of Weightwatchers.com.

So, on the stand-alone basis, Weight Watchers International's second quarter revenues were 244.9 million as compared to 258.9 million in the second quarter of 2003, a decline of 5.4%.

Global attendance at company-owned meetings declined 7.1% to 15.5 million.

Operating income of 82.5 million in the quarter compares to 97.6 million a year earlier.

Operating income declined 15% at a steeper rate than revenue, primarily as a result of some compression in our gross margin.

Net income for the quarter decreased at a lesser rate, down 8.4% to 49.3 million from 53.8 million in the second quarter last year.

Earnings per fully diluted share for Weight Watchers International on a stand-alone basis were 46 cents this quarter as compared to 49 cents in the prior year quarter.

Moving now to the performance of our NACO operation.

For the second quarter, NACO's attendances were 8.3 million. 14.6% lower than last year's.

Organic attendance, excluding the impact of acquisitions, fell 16.7%.

As Linda discussed, the U.S. market is starting to show more negative sentiment toward low-carb dieting approaches and toward the associated food products, with surveys showing the absolute number of low-carb dieters is declining.

However, on a relative basis, there were significantly more of these dieters in this year's second quarter than at the same time last year, when low-carb was still gaining momentum.

NACO's second quarter revenues declined at a rate similar to the -- to the attendance decline off 14.9% to 123.7 million from 145.3 million the year earlier.

In terms of the composition, meetings fees revenues slightly outpaced attendance, declining 13.3% as the mix of average meetings fees improved with the acquisition of two additional franchises.

Product sales, however, were down 19.9% in the quarter.

As we noted in our last two calls, the sale of consumable products in the meeting room has been a challenge for us this year.

Consumer research and our internal review process have led to us a realignment of our product offerings in this area.

We're in the process of reintroducing a classic line of our all-time favorite bar flavors and we've begun rolling out a new line of savory snacks.

Both have performed well in our test markets.

Products of performance year-over-year has also been affected by a lower name of brand-new enrollees who tend to purchase more of our higher priced, one-time products as they get started.

Internationally second quarter revenues from our meeting operations rose 12.6% to 93.7 million from 83.2 million last year.

In local currency, the revenue increase was 3% and attendance grew an equivalent amount to 7.3 million, in line with our expectations.

The U.K., our most competitive market, is in a noninnovation year but still delivered 6.8 million attendances, on par with the second quarter last year, which had posted 13% attendance growth over 2002.

The U.K. will innovate again this coming January.

U.K. meeting revenues grew 8.7% in the quarter, excluding the exchange rate, they declined 2.6%, primarily as a result of soft product sales.

Continental Europe, over the last quarter prior to its innovation, delivered strong, 8.5% attendance growth in the second quarter, reaching 2.9 million attendances.

Continental Europe's second quarter meeting revenues increased 14.3%, 17.8% in local currency versus the prior year quarter.

Now moving to our other revenues, franchise commissions were 4.8 million in this quarter, commissions declined 22% from the prior year levels with 6% of the decline resulting from the Company's acquisitions of its Dallas, New Mexico and Washington, D.C. franchise territories, which took place after the second quarter 2003.

The overall net impact of making these and other franchise acquisitions is accretive to the Company.

The decline in commissions from our remaining domestic franchises mirrors the marketplace issues that NACO's been facing.

Other revenues were 10.8 million this quarter, an increase of 1.5 million or 16% over last year's level.

Licensing revenues excluding Weightwatchers.com, rose 34%.

Driven by strong performance from our existing international licenses with additional contribution from new licenses, as well.

Royalties received from our Weightwatchers.com licensee, representing 10% of its net revenue, were 2.1 million this quarter.

Gross margins in the second quarter of this year were 52.3%, down 280 basis points from 55.1% in the second quarter of last year.

Lower attendances per meeting drove the majority of the gross margin compression, as we opted to maintain our meeting presence in communities and companies during this period of softness.

In addition, gross margin declines include the impact of discounting certain products in advance of upcoming innovations.

Looking at marketing and G&A, marketing expense of 26.2 million this year compares to 25.8 million in the second quarter last year.

An increase of 1.6%.

As a percent of revenues, marketing expenses rose to 10.7% from 10% in the prior year quarter.

A function of the decline in revenues.

G&A expenses in the quarter were 19.5 million, up 1% versus last year.

G&A was 8% of revenues in the 2004 second quarter as compared to 7.5% in the year earlier quarter.

Also a function of the revenue decline.

Second quarter operating income was 82.5 million down 15.1 million or 15.5% versus prior.

The operating income margin was 33.7% in the quarter versus 37.7% in the same period a year ago.

We significantly reduced our interest charges beginning in the second half of last year by repurchasing and retiring most of our 13% senior subordinated notes and refinancing our debt.

Accordingly, our effective interest rate moved from 8.2% in the second quarter of last year to 3.3% this year, and our net interest expense dropped by 71% to 3.1 million.

The remaining portion of our 13% senior subordinated notes, 5.1 million U.S.-denominated and 8.4 million euro denominated, can be redeemed beginning October 1, 2004, at a premium of 6.5%, which will result in a small charge in 2003.

It is our intention to retire those notes at that time.

On an annual basis, this will reduce our interest expenses by approximately 1.3 million based on current interest rates.

Other income and expense net on our income statement was 0.2 million of expense in this year's second quarter as opposed to 0.9 million of income in the year earlier quarter.

Last year's 0.9 million of income resulted from a $5 million unscheduled loan repayment made to us by Weightwatchers.com.

The benefit of which was partially offset by the recording of unrealized foreign currency losses related to the marking to market of the then-outstanding 100 million of senior subordinated euro denominated notes net of hedges.

This year, Weightwatchers.com's scheduled loan repayments occur in the first and third quarters.

During the first six months of 2004, we accumulated cash flow from operating activities of 141.5 million as compared to 138.6 million for the 6 months of 2003.

After investing in financing activities, we ended the 6 month period in 2004 with 28.2 million of cash, an increase of 4.7 million in the cash balance from the start of this year.

Our free cash utilization in the 6 months consisted of the repurchase of 1.8 million shares of our stock for 65.5 million, consistent with the stock repurchase program that we announced in October of last year.

Also, we acquired our Washington, D.C. franchise for 30.5 million during the first six months of 2004.

In addition to the 96 million of cash utilization that I just described, our net pay down of debt in the first 6 months of 2004 approximated 37 million.

As you may recall, we've refinanced earlier this year moving a large portion of our term loans to a $350 million revolving credit facility, enabling to us more efficiently manage cash.

Our total debt on the balance sheet at the end of June, 2004 was 432.7 million, 37.2 million lower than 46 -- 469.9 million at December 2003.

On a trailing four quarters basis, our net debt-to-EBITDA ratio is 1.3 times.

Regarding other changes to the Weight Watchers International stand-alone balance sheet as compared to the year-end 2003 balance sheet, the fluctuation in assets and liabilities reflect the normal seasonality of the business and the addition of the Washington, D.C. franchise acquisition to goodwill.

As Linda noted and as I'm very pleased to report, we will soon be closing on the purchase of our Fort Worth franchise, complementing our recent Dallas acquisition.

Fort Worth provides us with about 650,000 annual attendances, the purchase price is 30 million.

And now I'll turn the discussion back.

Thank you, Ann.

Before we move on to questions, I'd like to review our guidance.

After taking into account that NACO has performed below our expectations this summer, we are reducing the top end of our previous guidance from $1.80 to $1.75.

Therefore, we expect to report fully diluted earnings per share this year between $1.70 and $1.75.

This guidance excludes the effect of consolidation of Weightwatchers.com and charges related to the early extinguishment of debt.

Ashley, we'd now be happy to answer questions.

Thank you, the floor is now open for questions.

If you have a question, please press star 1 on your touch-tone phone at this time.

If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key.

We do ask that while you pose your question that you pick up your handset to provide optimal sound quality.

Once again, to ask a question, please press star 1 on your touch-tone phone at this time.

Our first question is coming from Greg Cappelli of Credit Suisse First Boston.

Please go ahead.

Hi, Greg.

Hi, Linda and Ann.

Hi, Greg.

Hi.

Just a couple of quick questions.

I know you've got the big launch coming up, sounds like toward the end of this month.

As far as the new marketing campaign that you talked about, when do you actually begin to incur the additional expense?

I remember last year with the launch of FlexPoints you did increase spending on marketing and advertising and I wonder if we could get an idea of when that starts to hit and then at what kind of level will we see those expenditures increase?

Will it be similar to last year?

Obviously it's a quarter 3 event as it was last year, Greg, and we -- it is our intention, obviously, to support this innovation and we are anticipating spending a bit more money than we put into the market last year.

It's roughly proportional that we spent to last year, it's a bit more.

And we should see that in 3Q.

Starts in Q3 but obviously goes into Q4 as the campaign progresses.

Got it.

And then it sounded like you are expecting, as attendances hopefully build from that, to see -- did I hear you right, positive organic NACO growth by the end of the fourth quarter?

Yes, we -- how I characterized it, because, obviously, we got lower volumes going into the summer, when you're looking at quarter 3, we're still anticipating an organic year-over-year decline.

It will be better than this quarter that we've just recorded but it will probably be in the low teens.

By the time we get to the end of the fourth quarter, we certainly expect to have our attendance level higher than it was at the end of last year.

Got it, understand.

In terms of the new program, I understand you don't want to talk about it.

Is there anything you can do to categorize this as being, you know, a hybrid program or something completely different from FlexPoints currently, an option perhaps to that for your customer base.

I can understand why you're asking, Greg, but I have to is say our marking people put such a lot of work into developing and coordinating our consumer communication program for this launch, you know, I really don't believe that it's in our best interest for me to preempt this communication by discussing it today.

I did say it was significant.

We would wouldn't have just tested it on over 10,000 people in our meetings if it wasn't significant in its nature.

We've been very, very pleased with all of the testing that we've done and all of the endless focus groups that we've been doing on the program, as well as the marketing, which, of course, we've been in the market, doing map kind of research right up until I have to say this week.

Okay.

Just one more quick one.

In terms of the low carb, you know, phenomenon or craze, have you -- you know, that's actually, you know, hit Europe yet or some of your markets over there, the U.K. and Europe?

Do you expect it to?

I've mentioned in quite a few of our calls since this, you know, sort of tidal wave hit the U.S. that we also had a lot of publicity on the low carb diets in the U.K..

Now, the big difference, obviously, was -- and this is what we lamented last summer, that when it came to the U.K., the media and the experts were much more balanced in their coverage of the whole dieting approach.

So, therefore it got considerable negative publicity, obviously, as well as the hype that -- that was being promoted by the diets themselves.

And I think therefore the -- the market in the U.K. was never affected to the same degree as we were here in the United States.

But I can't say that it wasn't over there.

I've been saying for the past year that it has been over there.

We're just very pleased with our results, particularly in light of this.

If you're looking at other markets, you know, if you -- if you've traveled in continental Europe at all, if you -- if you sort of said to a Frenchman you're not going to have any bread, you wouldn't find a very positive response.

I think that those markets are just a little bit less likely to pick up the more extreme fads.

But it has a presence everywhere I mean they're marketing it everywhere in the world.

We're just seeing the impact here in the United States.

Especially if you're an American telling a Frenchman they couldn't have any bread.

You can't be an American telling a Frenchman he can't have any bread.

Thanks a lot.

Thank you, Greg.

Thank you.

Our next question is coming from Amy Chasen of Goldman Sachs.

Please go ahead.

Hi, Amy.

Hi, how are you?

Just fine, thank you.

A couple of questions.

First of all I don't mean to beat a dead horse here, but August 22nd, I understand, is the date you're going to tell your members about the new launch, that's 10 days from now.

I wonder, you have an opportunity now with the whole financial community on the phone to tell us about it, I just don't understand how 10 days can make much of a difference?

Well, you know, quite a few of our investors, particularly in our one to ones over the past year have just talked a lot about our -- our PR efforts and how we gather all these things together and how we galvanize a cohesive message in the marketplace all at once and I have to tell you that the marketing team have been working very, very hard in order to achieve that.

So, although this number of days seems like a very small event to you, I -- I personally have been involved in an awful lot of the briefings of specific editors and publications, because they're under strict embargoes, I think it would be unfair of me to break that embargo myself and to tell what is really a public forum, even though I know you investors are incredibly interested.

I promise you press releases will go out at the time.

We ensure you get them hot of the press.

You can go into meetings, obviously, see the program in action.

We will be glad to post you copies of the new program so you can see the material yourself.

We will do everything we can to support you in terms of your knowledge as soon as its available.

Will you do a conference call or meeting with the investment community so we can learn more about it?

I don't think it's necessary.

Our programs are written for the average person to be able to pick up our program material and understand what we're asking them to do.

I hope that when you see it you'll just see that it is something quite different and that we've achieved clarity with it.

If we go into a meeting, your Weight Watchers leader will explain it.

So, please stay for the new member orientation at the end.

And just two other quick ones.

The product sales, again, were -- were very weak and we under the impression that you were in the process, kind of in the first half of the year, of relaunching some of those bars.

Yeah.

And yet it doesn't look like that's happened yet.

Was there a delay?

We were certainly in the process of reformulating, repackaging, you know, repositioning them, if you like, in terms of the flavors of the bars.

And those new bars, and I have to admit one of the big things that we've done is taken out things like the transfats, which I think is a very good move right now.

In the current climate.

We have been testing them to make sure that -- that we have got them right and we've been testing some variations that are very exciting for us and they are being rolled out as we speak.

So, when we say that we're reformulating and changing our bars, obviously that isn't something that you can do overnight.

Is the -- in terms of your guidance and bringing down the high end --

Uh-huh.

It doesn't look to me like the -- I mean I know the North American attendance growth this quarter was weaker than anticipated, but not dramatically.

I mean is there something else that's contributing to the lower guidance, is that the product sales were also weaker than you thought?

No, not really, I mean it has been, obviously my custom, if you like, to tighten our range as the year goes on so I'm really following what we've done in previous years.

I think that when we gave that original guidance, obviously, although it's just a minor depression compared to what we expected in the latter half of this quarter, that we're just reporting, it did mean that it was, you know, prudent for that he me to say that if you're looking at our annual guidance at the bottom half of our previous range is the appropriate place to -- to shrink it to, to tighten it.

That's what we've done.

We certainly have not moved the bottom of it.

Okay, thank you.

Thank you.

Our next question is coming from Chris Ferrara of Merrill Lynch.

Please go ahead.

Hi.

Hi, Chris.

Hi, Chris.

Is the Fort Worth acquisition included in the guidance that you've given for the year?

No.

No.

Fort -- Fort Worth will be minor and there's a minor sort of attendance figure, obviously, but we do have, you know, transition costs and all the usual --

Right, it's very minor.

Okay.

And also you talked about, I guess the trends in the changes you've seen on a year-over-year basis.

In the number of people and low-carb dieters, I think you said that Q4 will be the first year that even though it's declining, would be, you know, lower than it was --

Chris, I was actually reporting on somebody else's report, that wasn't mine, I was reporting on the Morgan Stanley survey that they did where they were predicting that it would go into negative in Q4 4.

Okay, but that's not necessarily something that you buy into --

No, I said if you're looking at it, there seems to be a lot of take-up now that we have passed the peak, we are moving into decline that maybe the food products will not have the long life that a lot of the companies that have invested in them would have hoped.

So, I'm just reporting on what I'm reading probably the same as you're reading.

Got it.

And do you survey your enrollees, in particular, new enrollees to find out where they came from?

And are they disgruntled low-carb dieters?

Do you see any trends in that if you do?

We do some of that, we don't spend a lot of time focused on that.

I mentioned that the number of low-carb refugees, you know, is on the increase.

But, you know, it's not something, as I say that we're really focused on.

What we're focused on is the exciting innovation that we'll be putting in the market and as I said, we've done so much research on this.

It really came out of new insights that we gained with the research that we started last spring.

We believe it has a lot of relevance to the market right now.

So, I'm -- I'm extremely positive about that.

Got it.

And just one other thing, when you talked about how extensive your testing is for this new innovation, what was a typical testing schedule like for a previous product?

How different was it?

Obviously we weren't making a significant change to -- to anything, you know, the -- the point system is the underlying mechanism of FlexPoints.

So, when we put FlexPoints in we didn't do this significant testing.

Now, you are all going to push me, I'm sure, to try and get more and more details about this program.

So that I can face my marketing people tomorrow I'm just going to back off any discussion of what this innovation might be.

Just please rest assured that it will be there soon, that we've done a tremendous amount of work on it, we're all incredibly excited and I have listened to so many focus groups myself I truly believe that we have something that will resonate in the market and will build, obviously, the Weight Watchers brand on into the future.

Okay, thanks.

Operate thank you.

Our next question is coming from Andrew McQuilling of UBS.

Please go ahead.

Hi, Andrew.

Hi, Linda, how are you guys doing?

Great, thank you.

Hi, Ann.

A question, Linda, maybe about the percentage of new members versus former members.

Yeah, yeah.

You know, in the -- in the June attendance.

You know, how low had the new enrollees gotten to as a percentage of attendances?

Right, well, it's one of the things that I said that characterized our position since this tidal wave sort of hit, that the people that we're missing most in terms of our enrollment are the brand-new people.

Obviously, they're off, instead of trying Weight Watchers for the first time, they're off trying, you know, the new fad for the first time.

But we were in a position where well over half of our enrollees were in the new category.

And now we have dipped below half.

We usually don't give precise terms and certainly don't give it on a month by month basis.

I do keep my finger on that pulse, of course.

I'm trying, though.

You're not going to tell me if it's lower than 40 right now or even 35?

I'm not going to tell you that.

I have to try.

I know you do.

I guess what can you tell us about the decision to switch from Cool Brands to Wells Dairy?

What attracted you to Wells Dairy relative to Cool Brands?

What do you think they can do better?

Obviously we've known right from the beginning that the contract with Cool Brands was expiring at the end of September.

And so we went through our normal, you know, in-depth evaluation processing.

We spoke to several parties.

We narrowed them down to a short list of two.

And, you know, after details negotiations with both of those companies we just concluded that Wells would be the better long-term partner in this ice cream category.

You know, we look at several criteria when we're evaluating the partnership and -- and chief amongst them would really be how good a caretaker of our brand, that's the Weight Watchers brand, we think the partner will be.

Of course we look at the economic terms they're proposing.

If you're just looking at all of the criteria, we felt that Wells was the better strategic partner for us.

And Linda, I don't know if you can, can you touch at all on some of these lawsuits yet?

Or are you uncomfortable doing it?

No, I'm not totally uncomfortable, although obviously we probably have a lawyer in the room at all time, but, you know, I am sure you've read, everybody has, that Cool Brands filed a countersuit in response to a suit that we filed against them on the 3rd of August.

Now, we didn't publicize our -- our suit.

We were really reacting to their, you know, public statements indicating that they did not intend to honor their contractual obligations under the contract that was expiring at the end of September.

So, we filed that suit to ensure that they do live up to their contractual obligations.

I suppose it's not surprising that they have now filed a countersuit in response to our suit.

You know, making claims that I have to say our lawyers have advised me have no merit.

Whatsoever.

All right.

Terrific.

And maybe one more if I can.

Are you comfortable talking about the Applebees related royalties in the quarter?

Well, we -- as we go forward and as we progress in this we will never be disclosing the exact terms of any of our license agreements and we will not be separating out an individual licensee and reporting on the revenues that we get from that licensee.

Of course, if they decided to disclose it in there filings or in their conference calls, then I might repeat what they say, but I don't -- I doubt that they will be separating us out, either, in that way.

Fair enough.

Thank you and looking forward to the new innovation.

Thank you.

Thank you, our next question is coming from Jerry Herman of Legg Mason.

Please go ahead.

Thanks, good afternoon, everybody.

Hi, Linda, hi, Ann.

Linda, could you give us more color on the -- the new licensing arrangements with the short-life cakes and muffins?

And just in terms of framing maybe how many SKUs that might apply to?

And likewise with the breakfast cereals?

They're so good I have to tell you.

We've -- I'm on the testing panel as you can tell.

We -- these right now are relatively limited range because obviously it's a brand-new area for us.

We've got two different cakes, I will call them finger cakes, they're a slice of cake, if you like, with icing, frosting and they're only 1 point per slice.

And one is chocolate, which is a favorite of a lot of people who are trying to control and lose weight.

And the other one is carrot cake, a spicy carrot cake.

And certainly from the innovation training meetings that I've been attending all over the country this summer, I can tell you that everybody who's tasted them thinks that they're wonderful and I think that's why the initial response, when they went on shelf, was so strong.

The -- the range is complimented then by two fresh muffins.

A blueberry and an apple cinnamon.

And all four of those products have just gone out.

It will obviously be expanded as time goes on.

The U.K. has a very good, solid, extensive range now of these types of products so I'm -- I'm -- I've been told, as an expression that the sales are just blowing out the door.

So, I'm hoping that this is just an early indication of what we'll be able to do in some of these non-Heinz core categories under our own brand, obviously.

Now, on cereals, that is a new license, just recently signed they're developing and in test right now the different cereals, it's not going to be a single cereal.

It's going to be a range of flavors or whatever you classify cereals as.

And obviously we have a lot of hope that's going to do a very good job, as well.

Because of the kind of -- I mean when we partner with these people, I think that what we bring to the party, which is so interesting and good for them, is not only do we help them recognize how to make it the best points value for the item, but they bring their expertise in making it taste as best as it possibly can.

There is not a lack of low calorie, low fat, low anything products out there.

It's just that most of them taste dreadful.

Okay.

And what about distribution on those products?

How extensively will they be distributed?

Well, obviously as they build up, that distribution will continue to increase.

I -- I -- we have a major, major, major retailer who's taken the cakes as a starting point.

You know...

They reported today.

They didn't mention us, I know, but --

Okay.

That's all right.

Let's go at that.

This is a conceptual question, but you talked about sort of the cycle of dieters and -- and when they become disgruntled and when they come back.

Can you conceptually talk about how that overlays with the innovation just in terms of timing so that you don't have folks still on the -- or I guess the concern would be that folks are remaining on the sidelines during the course of this important innovation?

I don't think you should also think of an innovation as a one-time event.

Think of an a innovation as the start of something new that will be ongoing.

Over the last few years when we've been explaining our approach to innovations, one of the things that we've explained is we generally speaking have a two-year cycle, and we have that cycle, not because we're married to it, not because we can't be longer or can't be shorter depending on the market and the requirements, but because if we're looking at our database and if we're looking at the behavior of people who return to Weight Watchers, two years is about the cycle that we would expect to see a lot of them come back, after they've finished their previous course.

So, we believe that with this sort of decline and -- and softening in -- in the low-carb craze, if you like, that there will be a time when more and more of those people who gave up that regime will actively be thinking about doing something about their weight problem again.

It's hard to say when exactly everybody will do it because we're all unique and individual, but we believe that our program, our new program, will be in the marketplace and obviously it will be in the marketplace next January and next April and everything, to capitalize on these people when they decide and this is where our positive message comes through.

When they decide, gosh, I really do have to do something about this weight issue, then they will have heard an awful lot about Weight Watchers' new program.

I also think that, you know, if you're just looking at all the noise that's out there in the marketplace, the other noise is about obesity in itself.

People do read, people do understand that this is a health issue.

I know that the -- the government has just come out with a -- USDA has just come out with a new dietary guidelines recommendations.

I think they came out yesterday.

If you look at those guidelines, they're incredibly supportive of everything that Weight Watchers has been expressing and has been committed to throughout this entire craze.

And this isn't Weight Watchers talking, this is really a panel of blue ribbon scientists that the government has employed to look at this issue every five years.

Recently, at the Prague conference on obesity, the European conference on obesity, we had our lifetime member study published.

Now, this is efficacy that nobody else in the weight loss arena can produce.

If you're looking at that Prague study, this is for long-term weight maintenance, in other words, weight loss maintenance, in other words, you have successfully completed Weight Watchers, achieved your healthy weight, completed our maintenance program and then you were just off living your life.

If you're looking at the one-year picture with our lifetime members, you are looking at a regain of only 20%. 20.3% to be precise.

Now, that compares with 2/3 regain.

In other words, 66% regain in the largest government study that everybody uses in terms of efficacy of weight loss maintenance.

If you're looking at the five-year mark, on the government study, virtually all of the weights had been regained.

If you're looking at the Weight Watchers lifetime member study, 52% of it was still kept off.

So, we're looking at 50% of the weight loss after five years is still kept lost.

I mean how many people can say that?

As these things get publicized, as people move and say I've got to do something sensible, it's the power and the trust in the Weight Watchers brand that will bring more and more of those people to us.

But the silver lining in this cloud, as I've said many times is, that fads bring more people into the arena.

And once you're in the arena, you usually carry on trying to solve your problem because it means you've recognized you have a problem.

So, I'm very encouraged by everything that is happening right now, outside of us and including what we are doing.

Ann, could I get you in the fray for a quick one here?

Sure.

With regard to Weightwatchers.com, understanding that you've made this -- this accounting shift here, if you were reporting under the old way, what would the bottom line EPS be?

And also does $11.9 million charge represent the cumulative deficit?

In other words that is the amount you need to eat through before you make the adjustment?

Yeah, 46 cents would be the -- the EPS for the quarter for us.

It's 49 as reported with 3 cents coming from Weightwatchers.com.

The 11.9 -- $11.1 million that you saw in the first quarter was the cumulative loss of Weightwatchers.com netted against other things, in other words, we had to write our lone back up and on the things like that, but that's all compiled within the $11 million that we really haven't detailed and probably won't do.

So you won't say that that represents the -- the amount you need to --

No, no, no, and doesn't, there are other things involved in that number.

Okay, thanks.

Thank you.

Our next question is coming from Greg Badishkanian of Smith Barney.

Please go ahead.

Hi, thank you.

I was curious, if -- if the number of absolute dieters in the growth rate was higher in the first quarter and the growth rate moderated in the second quarter according to the Morgan Stanley report, why wouldn't you at least see the benefits toward the end of the quarter early third quarter?

I think that -- the growth rate and the number of actual dieters are two different things, Greg, it's that -- if I'm understanding your question.

Remember that there is always a January flow through.

We -- as I report for our first quarter, we did have a successful January campaign and that brought in a volume of people to us.

If you're looking at it logically and realistically from what I just reported today, than you can surmise that our spring campaign, which finished at end of May, wasn't as successful, obviously as our January campaign and because we were up against an ever-increasing year-over-year number of -- of low-carb dieters, that's where, you know, the picture -- the picture got moved.

Yeah.

Uh-huh, uh-huh.

Okay.

Could you -- I think you can sort of -- interpret from it, but the NACO organic growth rate, March/April when you had the low-teen guidance versus sort of what it was in June/July, can you sort of give us a sense there?

Yes, what I was disappointed in, as I said, is we really expected, you know, for a lot of reasons, we really expected the spring campaign to be a bit stronger, particularly there at the end, than it actually was.

So, therefore the second half of the quarter, we expected to be stronger than it was.

And that's why we had those couple percentage points worse than we had forecast when we were talking to you in our last conference call.

It's not that the trends were any worse, our year-over-year picture relative to private year, prior year, has stayed relatively stable.

It was that we expected a bit of an improvement and unfortunately we didn't see that.

That's where my disappointment came.

Can you give us numbers like it was trending at low teen and ended the negative high teen or something like that to get a sense of --

No, I just think that, you know, if you're looking at it, I try to give you a picture of -- of where we think and its directional, obviously, we don't give quarterly guidance, we never have.

We're just trying to help you frame where we think the Company is and where we think the next quarter is going.

If it's going to be negative, low teen, it's obviously going to be more negative the early part in the -- in the program than in the --

As I said, the innovation only kicks in at latter part of quarter 3 so we still have this summer that we're currently in, we just had the quarter 2 impact.

We still have to go through that summer, we're still in that.

You only have like five weeks of the program.

Yeah.

Okay.

That's fair.

You're not looking for the full impact of the innovation until quarter 4, really.

Okay.

And in terms of the '04 guidance and, you know, how much of that would involve any maybe perhaps up front payments from the Wells contract or, you know, how do you sort of account for that and how can we look at that?

I'm sure you know, we're not -- we don't disclose the details, but I will tell you that any payment that we would get from -- from any licensee up front we would -- we would have to amortize across the life of the license, so it would not be a bubble in the quarter.

Uh-huh.

At all.

So it would be as you sort of got the rev -- you know, generated -- generated the revenue from that?

The timing would be amortized almost equally across?

Yes it doesn't happen to be the case in this particular case, we are not getting any material up front payment, but, yeah, that's correct.

Okay, so does that mean the word of the trade was that you got a $5 million upfront payment?

I guess that's not --

Really, I hadn't heard that.

I heard it from a few different sources in the trade, but -- Okay.

The trade has not proved to be accurate in quite a few things on this one.

Fair enough!

Very good then.

Appreciate the help.

Thank you.

Thanks, Greg.

Thank you.

Our next question is coming from Jeff Stein of KeyBanc Capital Markets.

Please go ahead.

Hi, good afternoon.

A couple of questions.

Hello, Jeff.

Hi, good morning, Linda and Ann.

Or good evening.

A couple of questions, first of all, Ann, on the share buyback it looks like you purchased roughly 700,000 shares for about $23.5 million, would that be correct?

That's correct, yeah.

About 650, actually.

Okay.

Okay.

Just kind of curious as to why, you know, again the sharp drop in your share price you weren't a little bit more aggressive on the share buyback considering you paid a much higher price in the fourth quarter of last year?

You know, for us we're always balancing, you know, what would be more accretive for us, which would be the acquisition of franchises and so as we look at the total picture we weigh what -- what's the most appropriate investment at the time.

I think the sort of decline you're looking at, too, Jeff, is more recent -- I mean Ann was reporting only on quarter 2.

Exactly.

Right.

Okay, great.

And with respect to the acquisition that you announced, would -- would it -- did you pay roughly the same multiple of EBITDA that you have for other acquisitions?

Yeah, pretty much.

It's in that 5 to 6 range.

Okay, 5 to 6.

Very good.

With regard to the launch of the new program, are the training costs of your team leaders going to be roughly the same as it was with FlexPoints?

Obviously with our acquisitions we have more team leaders than we had previously.

But if you're just looking at it it's a similar exercise, yes.

And the cost of advertising on television in the back half of the year, I presume it's going to be more costly because of the -- the elections, has that been factored into the equation?

Yes, we -- obviously are looking to have the same kind of presence, if not more so, than we had in prior year.

So, when we budget out in everything, our marking team and our buying team take into consideration everything that's happening in the marketplace.

So we're not spending to a dollar, we're looking to the presence that we're getting out of those dollars and making sure that our presence is as great.

Okay, very good.

Final question, you know, to be the devil's advocate, the Company has been overly optimistic, the last several quarters, regarding the magnitude of attendance drops and when attendance may turn and by how much.

I'm just kind of curious in terms of what gives you the level of conviction that your attendance will be able to turn positive by the fourth quarter?

Because going from double-digit declines to positive is a pretty big jump in a relatively short period of time.

Well, I think that I can only repeat what I've already said.

We never pretended that we could actually predict precisely when the things were going to wane, in the outside world, I mean, in term of the -- the carb craze, was going to peter out.

But if you're going back to our innovation, I will just repeat was I said, you know, it is just a more significant innovation and we really feel that with all the effort that we're putting into our marketing, it's not just the money we're spending in our marketing.

As I said in the last call, we have -- we have put in tremendous amount of research on the message alone, and on the relevance of that message and on the creative write-up until the time that we're slipping it to the stations.

So, we have a lot of confidence because we've been listening to an awful lot of potential customers.

When I say positive, obviously I was talking about the positive will be towards the end of quarter 4.

You're absolutely right.

The switches and the changes are gradual because first we have the influx of -- of enrollees and I have to remind everybody that FlexPoints last year, at the start of the innovation, had quite strong enrollees.

What we -- what we found was it didn't have that sustainability to keep that going and to keep that building.

So, you know, we were really looking at the positive picture toward the end of quarter 4.

That's why I said we had the confidence and that we had the confidence that at the end of the financial year, we will be looking at a higher organic North American attendance figure than we saw at the end of last year.

Got it.

In organic attendance.

Okay.

And Linda, did you mention the new licensees for cakes and muffins by name?

If not, could you repeat those, please please?

Yeah, I didn't actually mention it by name.

I don't see any reason why I can't.

They're Don foods.

I'm sorry.

Don foods.

Don foods?

Uh-huh.

Don?

Dawn.

Okay.

And that's for both cakes and muffins?

That's for both cakes and muffins.

Okay, thank you very much.

Okay.

Thank you.

We have time for one last question.

Our last question is coming from Chris Ferrara of Merrill Lynch.

Please go ahead.

Hi!

Hi, Chris.

Hi, Linda.

I think really briefly you made a reference to the Company's normalized growth trajectory and I wondered if you could revisit that a little bit and give if there's any update on how you see that in the long, long-term?

I really believe that what we've always said was that if you're looking at our total mix, because we have an international presence, we have a lot of different levers in terms of where our revenues are coming from, we have a tremendous amount of penetration opportunity in our existing markets, let alone the embryonic markets that we've just gone into in the last few years, so, I truly believe that we could get back to those projected growth pictures that we were talking about, you know, when we first separated from Heinz.

And that basically is looking at, you know, the 10 to 12% double-digits in revenue growth and that will produce, because of the various things we can do and the EPS growth in the region of 20%.

And I still have confidence that we can continue to do that.

This problem of obesity is not going away.

Everybody, including the government, including companies, including the individuals themselves, are trying to find not just a cost-effective solution and we're one of the few cost-effective solutions, but they're looking for a solution that had some kind of sustainability.

Some kind of -- some kind of ability to say not only will you lose it, but you will be able to maintain it.

And I think that's where we, in the education arena, have such an edge over other dieting methods.

So, I am -- I'm optimistic.

You know, this has been an incredible fad, you know, we've had fads every year in and out for our 40-plus years.

This just happens to be an extraordinary one, but we -- we are weathering it.

We will come out the other side.

Stronger.

And we will be back to our, you know, growth trajectories that we have said this company is capable of doing.

And with the margins that -- that we have talked about and we're still producing.

Got it.

And I hate to end this last one on a negative tone, but I just wanted to ask you, in the event that it turns out that you're a little too early on the innovation this time and something works out similar to what happened last year, would it be more damaging to the bottom line, is there a much higher level of investment in this one relative to this one?

No, no, not at all.

That's what's the beauty of Weight Watchers, you know, our investment is so much more on the intellectual side rather than, you know, CapEx or any of the other things that people have to do.

You know, if it's there too soon it doesn't make it a problem.

It means it will take slower to climb and to turn around.

But, you know, I don't -- I really believe that we are making a substantive change that it does have resonance in the market.

It will expand our appeal to more people and therefore more people will come into Weight Watchers.

And we're so close, we don't have very long, folks, to wait.

So, I must say I really am looking forward to telling you, you know, more about our early results on our next conference call.

But I can only thank you for joining us today.

Thanks.

Thank you.

At this time, I'd like to turn the floor back over to the presenters for any closing remarks?

I think that we've tried to cover for you our situation.

We've tried to tell you without obviously spoiling our PR campaign, which will be starting that we do have a very meaningful innovation coming up.

So thank you very much for joining us.

Thank you for your interest in Weight Watchers and I look forward to our next conference call.

Thank you.

That does conclude today's teleconference.

You may disconnect your lines at this time and have a wonderful day.