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

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The accompanying consolidated financial statements include the accounts of Weight Watchers International, Inc. and all of its subsidiaries. The term “Company” as used throughout these notes is used to indicate Weight Watchers International, Inc. and all of its businesses consolidated for purposes of its financial statements. The term “WWI” as used throughout these notes is used to indicate Weight Watchers International, Inc. and all of the Company’s businesses other than WW.com. The term “WW.com” as used throughout these notes is used to indicate WeightWatchers.com, Inc. and all of the Company’s Internet-based businesses.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include amounts that are based on management’s best estimates and judgments. While all available information has been considered, actual amounts could differ from those estimates. The consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments including those of a normal recurring nature necessary for a fair statement of the interim results presented.

OnAs further discussed in Note 3, effective with its formation in February 5, 2008, Weight Watchers Asia Holdings Ltd. (“Weight Watchers Asia”), a direct, wholly-owned subsidiary of the Company and Danone Dairy Asia (“Danone Asia”), an indirect, wholly-owned subsidiaryconsolidated the financial statements of Groupe DANONE S.A., entered into a joint venture agreement to establish a weight management business in the People’s Republic of China. Pursuant to the terms of the joint venture agreement, Weight Watchers Asia and Danone Asia owned 51% and 49%, respectively, of the joint venture entity, Weight Watchers Danone China Limited (together with all of its businesses, the “China Joint Venture”). On April 27, 2011, Weight Watchers Asia entered into a share purchase agreement with Danone Asia, pursuant to which Weight Watchers Asia acquired Danone Asia’s 49% minority equity interest in the China Joint Venture as of that date. Because the Company had a direct controlling financial interest in the China Joint Venture, it consolidated the entity from the first quarter of fiscal 2008. Effective April 27, 2011, the date of the acquisition of Danone Asia’s minority equity interest by Weight Watchers Asia, the Company no longer accounts for a non-controlling interest in the China Joint Venture.Limited.

These statements should be read in conjunction with the Company’s Annual Report on Form 10-K for fiscal 2010,2011, which includes additional information about the Company, its results of operations, its financial position and its cash flows.

Recently Issued Accounting Pronouncements:

In September 2011, the Financial Accounting Standards Board (the “FASB”) issued updated guidance on the periodic testing of goodwill for impairment. This guidance will allowallows companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This guidance is applicable for fiscal years beginning after December 15, 2011, with early adoption permitted. The adoption of this guidance isdid not expected to have a material effect on the consolidated financial position, results of operations or cash flows of the Company.

In June 2011, the FASB issued authoritative guidance requiring companies to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The provisions of the guidance are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. SinceIn December 2011, the FASB issued an amendment deferring the effective date for the presentation of reclassification adjustments out of accumulated other comprehensive income. The Company adopted the provisions of this guidance amendsin the disclosure requirements concerning comprehensive income, itsfirst quarter of fiscal 2012, and such adoption willdid not affect the consolidated financial position, results of operations or cash flows of the Company.

In May 2011, the FASB issued authoritative fair value guidance entitled “Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. Some of the amendments included in the guidance clarify the FASB’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. This guidance is effective for interim and annual periods beginning after December 15, 2011. The Company is still evaluatingadopted the potential future effectsprovisions of this guidance.guidance in the first quarter of fiscal 2012, and such adoption did not have a material impact on the disclosures in its consolidated financial statements.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

In January 2010,Reclassification:

Certain prior year amounts have been reclassified to conform to the FASB issued authoritative guidance revising certain disclosure requirements concerning fair value measurements. The guidance requires an entity to disclose separately significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and to disclose the reasons for such transfers. It also requires the presentation of purchases, sales, issuances and settlements within Level 3, on a gross basis rather than a net basis. These new disclosure requirements were effective for the Company beginning with its first fiscal quarter of 2010, except for the additional disclosure of Level 3 activity, which was effective for fiscal years beginning after December 15, 2010. The Company did not have any such transfers into and out of Levels 1 and 2 during the nine months ended October 1, 2011 and currently does not maintain any assets or liabilities classified as Level 3.

In October 2009, new revenue recognition guidance was issued regarding arrangements with multiple deliverables. The new guidance permits companies to recognize revenue from certain deliverables earlier than previously permitted, if certain criteria are met. The new guidance is effective for fiscal years beginning on or after June 15, 2010 and did not have a material impact on the Company’s financial position, results of operations or cash flows.current period presentation.

For a discussion of the Company’s other significant accounting policies, see “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for fiscal 2010.2011.

Acquisitions of Franchisees

The acquisitions of certain franchisees have been accounted for under the purchase method of accounting and, accordingly, their earnings of acquired franchisees have been included in the consolidated operating results of the Company since their datesthe applicable date of acquisition. There have been no key franchise acquisitions since fiscal 2008.

Acquisition of Minority Equity Interest in China Joint Venture

On February 5, 2008, Weight Watchers Asia Holdings Ltd. (“Weight Watchers Asia”), a direct, wholly-owned subsidiary of the Company, and Danone Dairy Asia (“Danone Asia”), an indirect, wholly-owned subsidiary of Groupe DANONE S.A., entered into a joint venture agreement to establish a weight management business in the People’s Republic of China. Pursuant to the terms of the joint venture agreement, Weight Watchers Asia and Danone Asia owned 51% and 49%, respectively, of the joint venture entity, Weight Watchers Danone China Limited (together with all of its businesses, the “China Joint Venture”). Because the Company had a direct controlling financial interest in the China Joint Venture, it consolidated the entity from the first quarter of fiscal 2008.

On April 27, 2011, Weight Watchers Asia entered into a share purchase agreement with Danone Asia, pursuant to acquirewhich Weight Watchers Asia acquired Danone Asia’s 49% minority equity interest in the China Joint Venture as of that date for consideration of $1. As a resultEffective April 27, 2011, the date of the acquisition of Danone Asia’s minority equity interest by Weight Watchers Asia, the Company now owns 100% of the China Joint Venture and no longer accounts for a non-controlling interest in the China Joint Venture. In connection with the acquisition, theThe noncontrolling interest that had been reflected on the Company’s balance sheet was reclassified to retained earnings.

For the ninethree months ended October 1, 2011,March 31, 2012, the change in goodwill was due to the closing of the Company’s Finland business and foreign currency fluctuations. The Company’s goodwill by reportable segment at October 1, 2011March 31, 2012 was $23,789$23,818 related to its WWI segment and $26,200 related to its WW.com segment. Franchise rights acquired are due to acquisitions of the Company’s franchised territories. For the ninethree months ended October 1, 2011,March 31, 2012, the change in franchise rights acquired was due to foreign currency fluctuations.

Aggregate amortization expense for finite-lived intangible assets was recorded in the amounts of $4,313$4,329 and $12,161$3,856 for the three and nine months ended October 1,March 31, 2012 and April 2, 2011, respectively. Aggregate amortization expense for finite-lived intangible assets was recorded in the amounts of $3,349 and $10,366 for the three and nine months ended October 2, 2010, respectively.

The carrying amount of finite-lived intangible assets as of October 1, 2011 and January 1, 2011 was as follows:

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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

The components of the Company’s long-term debt are as follows:

The Company’s credit facilities consist of a term loan facility and a revolving credit facility (collectively, the “WWI Credit Facility”). During the second quarter of fiscal 2011, the composition of the WWI Credit Facility changed as a result of the Company paying off amounts outstanding under certain tranches of the WWI Credit Facility that matured on June 30, 2011. Immediately prior to the change, the term loan facility consisted of two tranche A loans (“Term A Loan” and “Additional Term A Loan”), a tranche B loan (“Term B Loan”), a tranche C loan (“Term C Loan”), and a tranche D loan (“Term D Loan), and the revolving credit facility (the “Revolver”) consisted of two tranches (“Revolver I” and “Revolver II”). Immediately prior to the change, the total of the outstanding and available credit under the Revolver was up to $500,000, of which the Revolver I was $167,353 and the Revolver II was $332,647.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

On June 30,The carrying amount of finite-lived intangible assets as of March 31, 2012 and December 31, 2011 eachwas as follows:

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

The components of the Company’s long-term debt are as follows:

The Company’s credit facilities consist of certain term loan facilities and revolving credit facilities (collectively, the “WWI Credit Facility”). During the first quarter of fiscal 2012, the composition of the WWI Credit Facility changed as a result of the Company amending and restating the WWI Credit Facility to, among other things, extend the maturity of certain of the Company’s term loan facilities and the revolving credit facility and to obtain new commitments for the borrowing of an additional $1,449,397 of term loans to finance the purchases of shares of the Company’s common stock in the Tender Offer and from Artal Holdings (each as defined below in Note 6).

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Immediately prior to the amendment of the WWI Credit Facility, the term loan facilities consisted of a tranche A-1 loan (“Term A-1 Loan”), a tranche B loan (“Term B Loan”), a tranche C loan (“Term C Loan”), and a tranche D loan (“Term D Loan”), and a revolving credit facility (“Revolver A-1”). The aggregate principal amount then outstanding under (i) the Term A-1 Loan was $128,648, (ii) the Term B Loan was $237,500, (iii) the Term C Loan was $420,394 and (iv) the Term D Loan was $238,247. Immediately prior to the amendment of the WWI Credit Facility, the Revolver A-1 had no loans outstanding under it, $1,027 of issued but undrawn letters of credit and $331,620 in available unused commitments thereunder.

Following the amendment of the WWI Credit Facility on March 15, 2012, (i) $33,083 in aggregate principal amount of the Term AA-1 Loan and Revolver I matured$301,777 in aggregate principal amount of the Term C Loan were converted into, and was paid$849,397 in full satisfactionaggregate principal amount of obligations thereunder ($29,125commitments to borrow new term loans were provided under, a new tranche E loan (“Term E Loan”), (ii) $107,025 in aggregate principal amount of the Term B Loan and $12,050, respectively). Following$119,123 in aggregate principal amount of the maturityTerm D Loan were converted into, and payment$600,000 in fullaggregate principal amount of obligationscommitments to borrow new term loans were provided under, a new tranche F loan (“Term F Loan”), and (iii) $261,971 in aggregate principal amount of commitments under the Term A Loan, theRevolver A-1 were converted into a new revolving credit facility (“Revolver A-2”). The loans outstanding under each term loan facility consistedexisting prior to the amendment of the AdditionalWWI Credit Facility and the loans and commitments outstanding under the Revolver A-1, in each case that were not converted into the Term AE Loan, the Term F Loan or the Revolver A-2, as applicable, continued to remain outstanding under the WWI Credit Facility as the Term A-1 Loan, the Term B Loan, the Term C Loan, the Term D Loan or the Revolver A-1, as applicable. On March 27, 2012, the Company borrowed an aggregate of $726,000 under the Term E Loan and the Term D Loan. FollowingF Loan to finance the maturitypurchase of shares in the Tender Offer and payment in fullto pay a portion of obligationsthe related fees and expenses. On April 9, 2012, the Company borrowed an aggregate of approximately $723,397 under Revolver I, the Revolver consisted solelyTerm E Loan to finance the purchase of Revolver II, with a total of $332,647 of outstanding and available credit.

shares from Artal Holdings. At October 1, 2011,March 31, 2012, the Company had $1,066,800$1,750,788 outstanding under the WWI Credit Facility, which consisted entirely of outstanding term loans. In addition, at March 31, 2012, the Revolver A-1 had $218 in issued but undrawn letters of credit outstanding thereunder and $70,458 in available unused commitments thereunder and the Revolver A-2 had $809 in issued but undrawn letters of credit outstanding thereunder and $261,162 in available unused commitments thereunder. In connection with this amendment, the Company incurred fees of $25,425 during the three months ended March 31, 2012.

At March 31, 2012 and December 31, 2011, the Company’s debt consisted entirely of variable-rate instruments. Interest rate swaps were entered into to hedge a combinationportion of the cash flow exposure associated with the Company’s variable-rate borrowings. The average interest rate on the Company’s debt, exclusive of the impact of swaps, was approximately 3.18% and 2.40% per annum at March 31, 2012 and December 31, 2011, respectively.

The WWI Credit Facility provides that term loans and amountsthe loans outstanding under the Revolver II.A-1 and the Revolver II had $15,000 outstanding and $316,620 available.

A-2 bear interest at a rate per annum equal to either, at the Company’s option, the LIBO Rate (Reserve Adjusted) (as defined in the WWI Credit Facility agreement) plus an applicable margin or the Alternate Base Rate (as defined in the WWI Credit Facility agreement) plus an applicable margin, which applicable margins will vary depending on the Company’s Net Debt to EBITDA Ratio (as defined in the WWI Credit Facility agreement) from time to time in effect. At October 1, 2011,March 31, 2012, the Additional Term AA-1 Loan bore interest at a rate equal to LIBORLIBO Rate (Reserve Adjusted) plus 1.00%0.875% per annum; the Term B Loan bore interest at a rate equal to LIBORLIBO Rate (Reserve Adjusted) plus 1.25% per annum; the Term C Loan andbore interest at a rate equal to LIBO Rate (Reserve Adjusted) plus 2.125%; the Term D Loan bore interest at a rate equal to LIBORLIBO Rate (Reserve Adjusted) plus 2.25% per annum; and the Revolver IITerm E Loan bore interest at a rate equal to LIBORLIBO Rate (Reserve Adjusted) plus 2.50%2.25% per annum; the Term F Loan bore interest at a rate equal to LIBO Rate (Reserve Adjusted) plus 3.00% per annum; had any loans under the Revolver A-1 been outstanding, they would have borne interest at a rate equal to either the LIBO Rate (Reserve Adjusted) plus 2.25% per annum or the Alternate Base Rate plus 1.25% per annum; and had any loans under the Revolver A-2 been outstanding, they would have borne interest at a rate equal to either the LIBO Rate (Reserve Adjusted) plus 2.25% per annum or the Alternate Base Rate plus 1.25% per annum. For purposes of calculating the interest rate on the Term F Loan the LIBO Rate (Reserve Adjusted) will always be at least 1.00% per annum. In addition to paying interest on outstanding principal under the WWI Credit Facility, at October 1, 2011, the Company was

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

is required to pay aan undrawn commitment fee to the lenders under each of the Revolver IIA-1 and the Revolver A-2 with respect to the unused commitments under each such facility at a rate equalthat is dependent on the Company’s Net Debt to 0.50%EBITDA Ratio from time to time in effect. As of March 31, 2012, the applicable commitment fee rate for the Revolver A-1 was 0.4375% per annum and for the Revolver A-2 was 0.4000% per annum.

The WWI Credit Facility contains customary covenants including covenants that, in certain circumstances, restrict the Company’s ability to incur additional indebtedness, pay dividends on and redeem capital stock, make other payments, including investments, sell its assets and enter into consolidations, mergers and transfers of all or substantially all of its assets. The WWI Credit Facility also requires the Company to maintain specified financial ratios and satisfy certain financial condition tests. At October 1, 2011,March 31, 2012, the Company was in compliance with all of the required financial ratios and also met all of the financial condition tests and expects to continue to do so for the foreseeable future. The WWI Credit Facility contains customary events of default. Upon the occurrence of an event of default under the WWI Credit Facility, the lenders thereunder may cease making loans and declare amounts outstanding to be immediately due and payable. The WWI Credit Facility is guaranteed by certain of the Company’s existing and future subsidiaries. Substantially all the assets of the Company collateralizeCompany’s assets secure the WWI Credit Facility.

The Company amended the WWI Credit Facility on June 26, 2009 to allow itallows the Company to make loan modification offers to all lenders of any tranche of term loans or revolving loanscommitments to extend the maturity date of such loans and/or commitments and/or reduce or eliminate the scheduled amortization. Any such loan modifications would be effective only with respect to such tranche of term loans or revolving loanscommitments and only with respect to those lenders that accept the Company’s offer. Loan modification offers may be accompanied by increased pricing and/or fees payable to accepting lenders. This amendmentThe WWI Credit Facility also providesallows for up to an additional $400,000 of incremental financing through the creation of either new tranches of term loans or through an increase in commitments under the Revolver A-2, in each case to be provided to the Company under the WWI Credit Facility. The incremental capacity is uncommitted and the Company must find lenders to provide any such financing prior to incurrence. In addition, the Company may incur up to an additional $200,000 of incremental term loan financingloans through the creation of a new tranche of term loans, provided that the aggregate principal amount of such new term loans cannot exceed the amount then outstanding under the Company’sits existing revolving credit facility. In addition,facilities and the proceeds from such new tranche of term loans must be used solely to repay certain outstanding revolving loans and permanently reduce the commitments of certain revolving lenders.

On February 23, 2012, the Company commenced a “modified Dutch auction” tender offer for up to $720,000 in value of its common stock at a purchase price not less than $72.00 and not greater than $83.00 per share (the “Tender Offer”). Prior to the Tender Offer, on February 14, 2012, the Company entered into an agreement (the “Purchase Agreement”) with Artal Holdings Sp. z o.o., Succursale de Luxembourg (“Artal Holdings”) whereby Artal Holdings agreed to sell to the Company, at the same price as was determined in the Tender Offer, such number of its shares of the Company’s common stock that, upon the closing of this purchase after the completion of the Tender Offer, Artal Holdings’ percentage ownership in the outstanding shares of the Company’s common stock would be substantially equal to its level prior to the Tender Offer. Artal Holdings also agreed not to participate in the Tender Offer so that it would not affect the determination of the purchase price of the shares in the Tender Offer.

The Tender Offer expired at midnight, New York time, on March 22, 2012, and on March 28, 2012 the Company repurchased 8,780 shares at a purchase price of $82.00 per share. On April 8, 2010,9, 2012, the Company repurchased 9,499 of Artal Holdings’ shares at a purchase price of $82.00 per share pursuant to the Purchase Agreement. In March 2012, the Company amended and extended the WWI Credit Facility pursuant to a loan modification offer to all lenders of all tranches of term loans and revolving loans to, among other things, extend the maturity date of such loans. In connection with this amendment, certain lenders converted a total of $454,480 of their outstanding term loans under the Term A Loan ($151,775) and Additional Term A Loan ($302,705) into term loans under the new Term C Loan which matures on June 30, 2015 (or 2013, upon the occurrence of certain events described in the WWI Credit Facility agreement), and a total of $241,875 of their outstanding term loans under the Term B Loan into term loans under the new Term D Loan which matures on June 30, 2016. In addition, certain lenders converted a total of $332,647 of their outstanding Revolver I commitments into commitments under the new Revolver II which terminates on June 30, 2014 (or 2013, upon the occurrence of certain events described in the WWI Credit Facility agreement), including a proportionate amount of their outstanding Revolver I loans into Revolver II loans. Followingfinance these conversions of a total of $1,029,002 of loans and commitments, at April 8,repurchases. See Note 5.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2010, the Company had the same amount of debt outstanding under the WWI Credit Facility and amount of availability under the Revolver as it had immediately prior to such conversions. In connection with this loan modification offer, the Company incurred fees of approximately $11,500 during the second quarter of fiscal 2010.

On October 9, 2003, the Company’s Board of Directors authorized and the Company announced a program to repurchase up to $250,000 of the Company’s outstanding common stock. On each of June 13, 2005, May 25, 2006 and October 21, 2010, the Company’s Board of Directors authorized and the Company announced adding $250,000 to the program. The repurchase program allows for shares to be purchased from time to time in the open market or through privately negotiated transactions. No shares will be purchased from Artal Holdings Sp. z o.o. and its parents and subsidiaries under the program. The repurchase program currently has no expiration date.

During the ninethree months ended October 1,March 31, 2012, the Company purchased no shares of its common stock in the open market under the repurchase program. During the three months ended April 2, 2011, the Company purchased 814 shares of its common stock in the open market under the repurchase program for a total cost of $31,550. During the nine months ended October 2, 2010, the Company purchased 2,850The repurchase of shares of its common stock in the open market under the Tender Offer and from Artal Holdings pursuant to the Purchase Agreement was not made pursuant to the Company’s existing stock repurchase program for a total cost of $79,709.program.

Basic earnings per share (“EPS”) are calculated utilizing the weighted average number of common shares outstanding during the periods presented. Diluted EPS is calculated utilizing the weighted average number of common shares outstanding during the periods presented adjusted for the effect of dilutive common stock equivalents.

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

The number of anti-dilutive common stock equivalents excluded from the calculation of weighted average shares for diluted EPS was 234129 and 2,317352 for the three months ended October 1,March 31, 2012 and April 2, 2011, and October 2, 2010, respectively, and 165 and 2,210 for the nine months ended October 1, 2011 and October 2, 2010, respectively.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES8. Stock Plans

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

On May 6, 2008, May 12, 2004 and December 16, 1999, respectively, the Company’s shareholders approved the 2008 Stock Incentive Plan (the “2008 Plan”), the 2004 Stock Incentive Plan (the “2004 Plan”) and the 1999 Stock Purchase and Option Plan (the “1999 Plan” and together with the 2008 Plan and the 2004 Plan, the “Stock Plans”). These plans are designed to promote the long-term financial interests and growth of the Company

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

by attracting, motivating and retaining employees with the ability to contribute to the success of the business and to align compensation for the Company’s employees over a multi-year period directly with the interests of the shareholders of the Company. The Company’s Board of Directors or a committee thereof administers the Stock Plans.

In connection with the Company’s annual grant of stock compensation, on March 25, 2011, the Company granted 213 non-qualified stock options and 83 restricted stock units (“RSUs”) to certain employees. The options and RSUs will vest on the third anniversary of the date of grant and the options will expire 10 years from the date of grant. The options and RSUs had an aggregate estimated grant-date fair value of $4,368 and $5,359, respectively.

The effective tax rates for the three and nine months ended October 1,March 31, 2012 and April 2, 2011 were 35.1%38.5% and 37.1%38.0%, respectively, and for the three and nine months ended October 1, 2010 were both 38.9%.respectively. For the three and nine months ended October 1,March 31, 2012, the primary differences between the US federal statutory tax rate and the Company’s effective tax rate were state income taxes and increases in valuation allowances, offset by lower rates in certain foreign jurisdictions. For the three months ended April 2, 2011, the primary differences between the US federal statutory tax rate and the Company’s effective tax rate were state income taxes and increases in valuation allowances, offset by lower rates in certain foreign jurisdictions and the reversal of certain tax reserves due to the expiration of the applicable statutes of limitations and the US tax benefit associated with losses due to the closing of the Company’s Finland business. For the three and nine months ended October 2, 2010, the primary differences between the US federal statutory tax rate and the Company’s effective tax rate were state income taxes and increases in valuation allowances, offset by lower statutory rates in certain foreign jurisdictions.limitations.

UK Self-Employment Matter

In July 2007, Her Majesty’s Revenue and Customs (“HMRC”) issued to the Company notices of determination and decisions that, for the period April 2001 to April 2007, its leaders and certain other service providers in the United Kingdom should have been classified as employees for tax purposes and, as such, the Company should have withheld tax from the leaders and certain other service providers pursuant to the “Pay As You Earn” (“PAYE”) and national insurance contributions (“NIC”) collection rules and remitted such amounts to HMRC. HMRC also issued a claim to the Company in October 2008 in respect of NIC which corresponds to the prior notices of assessment with respect to PAYE previously raised by HMRC.

In September 2007, the Company appealed to the UK First Tier Tribunal (Tax Chamber) (formerly known as the UK VAT and Duties Tribunal and hereinafter referred to as the “First Tier Tribunal”) HMRC’s notices as to these classifications and against any amount of PAYE and NIC liability claimed to be owed by the Company. In February 2010, the First Tier Tribunal issued a ruling that the Company’s UK leaders should have been classified as employees for UK tax purposes and, as such, the Company should have withheld tax from its leaders pursuant to the PAYE and NIC collection rules for the period from April 2001 to April 2007 with respect to services performed by the leaders for the Company. The Company appealed the First Tier Tribunal’s adverse ruling to the UK Upper Tribunal (Tax and Chancery Chamber) (the “Upper Tribunal”), and in October 2011, the Upper Tribunal issued a ruling dismissing the Company’s appeal. TheIn January 2012, the Company is considering allsought permission from the UK Court of its options in light ofAppeal to appeal the Upper Tribunal’s ruling, dismissing its appeal.which the UK Court of Appeal refused in March 2012. In March 2012, the Company applied to the UK Court of Appeal for an oral hearing to seek permission to appeal to the UK Upper Tribunal, which was granted in April 2012 and will be held in June 2012.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

In December 2011, HMRC’s claim in respect of NIC was amended to increase the claimed amount for the period April 2002 to April 2007 and include the interest accrued thereon through December 2011. In addition, in February 2012, HMRC asserted a claim in respect of PAYE for the period April 2007 to April 2011 similar to what it had claimed for the period April 2001 to April 2007. The Company is currently appealing this PAYE claim with the First Tier Tribunal and the First Tier Tribunal has directed that the appeal be stayed until following the decision of the UK Court of Appeal with respect to the Company’s appeal of the UK Upper Tribunal’s ruling.

In light of the First Tier Tribunal’s adverse ruling and in accordance with accounting guidance for contingencies, the Company recorded in the fourth quarter of fiscal 2009 a reserve for the period from April 2001 through the end of fiscal 2009, inclusive of estimated accrued interest. On a quarterly basis, beginning in the first quarter of fiscal 2010 and through the second quarter of fiscal 2011, the Company recorded a reserve for UK withholding taxes with respect to its UK leaders consistent with this ruling. The reserve at the end of the second

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

quarter of fiscal 2011 equaled approximately $43,795$43,671 in the aggregate based on the exchange rates at the end of the third quarter of fiscal 2011. As of the beginning of the third quarter of fiscal 2011, the Company employs its UK leaders and therefore has ceased recording any further reserves.

Sabatino v. Weight Watchers North America, Inc.

In September 2009, a lawsuit was filed in the Superior Court of California by one of the Company’s former leaders alleging violations of certain California wage and hour laws on behalf of herself, and, if approved by the court, other leaders and those employees who have performed the location coordinator function in California since September 17, 2005. In this matter, the plaintiff sought unpaid wages and certain other damages. In October 2009, the Company answered the complaint and removed the case to the U.S. District Court for the Northern District of California (the “Federal Court”). In July 2010, the plaintiff filed an amended complaint adding two additional named plaintiffsreserves for this matter. In October 2010, the parties engaged in mediation and reached an agreement in principle to settle this matter in its entirety and, accordingly,addition, the Company recorded a reserve with respect to this matter of $6,500. In May 2011, the parties received the Federal Court’s final approval of the settlement and the Company made paymentsdoes not currently expect additional reserves will be required in connection with the settlementDecember 2011 amended NIC claim and the February 2012 PAYE claim by HMRC, as reserves had previously been made for these amounts. In February 2012, the Company paid HMRC, on a without prejudice basis, a portion of the amount previously reserved equal to approximately $6,364$30,018 based on the exchange rates at the payment date for estimated amounts claimed to be owed by the Company with respect to PAYE and interest thereon for the period April 2001 to July 2011. The reserve at the end of the first quarter of fiscal 2012 equaled approximately $13,653 in the aggregate inbased on the secondexchange rates at the end of the first quarter of fiscal 2011.2012.

Hanson-Kelly & Jackson v. Weight Watchers North America, Inc. and Weight Watchers International, Inc.

In January 2010, a lawsuit was filed in the U.S. District Court for the Middle District of North Carolina by two leaders alleging violations of certain federal and North Carolina wage and hour laws on behalf of themselves, and, if approved by the court, other leaders and receptionists in North Carolina since January 25, 2007. In this matter, the plaintiffs are seekingsought unpaid wages and certain other damages. In April 2010, the Company filed a Motion to Dismiss the claim for unpaid wages under the North Carolina wage and hour laws. In February 2012, the parties engaged in mediation and reached an agreement in principle to resolve the case for a de minimis amount. The court has not ruled yet on this Motion. Althoughapproved the Company disagrees withsettlement agreement negotiated by the allegations that it has violated federal and North Carolina wage and hour lawsparties, and the Company believes it has valid defensescase was dismissed with respect to this matter, litigation is inherently unpredictable. At this time, it is not possible to determine the outcome of, or estimate the liability related to, this action and the Company has not made any provision for lossesprejudice in connection with it.April 2012.

Other Litigation Matters

Due to the nature of the Company’s activities, it is also, at times, subject to pending and threatened legal actions that arise out of the ordinary course of business. In the opinion of management, based in part upon advice of legal counsel, the disposition of any such matters is not expected to have a material effect on the Company’s results of operations, financial condition or cash flows. However, the results of legal actions cannot be predicted with certainty. Therefore, it is possible that the Company’s results of operations, financial condition or cash flows could be materially adversely affected in any particular period by the unfavorable resolutions of one or more legal actions.

As of October 1,March 31, 2012 and April 2, 2011, and October 2, 2010, the Company had in effect interest rate swaps with notional amounts totaling $800,000$755,000 and $1,163,750,$977,500, respectively. In January 2009, the Company entered into a forward-starting interest rate swap with an effective date of January 4, 2010 and a termination date of January 27, 2014. During the term of this forward-starting interest rate swap, the notional amount will fluctuate. The initial notional amount was $425,000 and the highest notional amount will be $755,000.

The Company is hedging forecasted transactions for periods not exceeding the next five years. At October 1, 2011,March 31, 2012, given the current configuration of its debt, the Company estimates that no derivative gains or losses reported in accumulated other comprehensive income (loss) will be reclassified to the StatementsStatement of Net Income within the next 12 months due to hedge ineffectiveness.

As of March 31, 2012 and April 2, 2011, cumulative unrealized losses for qualifying hedges were reported as a component of accumulated other comprehensive income in the amounts of $11,521 ($18,886 before taxes) and $17,633 ($28,907 before taxes), respectively. For the three months ended March 31, 2012 and April 2, 2011, there were no fair value adjustments recorded in the Statement of Net Income since all hedges were considered qualifying and effective.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

As of October 1, 2011 and October 2, 2010, cumulative unrealized losses for qualifying hedges were reported as a component of accumulated other comprehensive income (loss) in the amount of $17,607 ($28,864 before taxes) and $32,491 ($53,263 before taxes), respectively. For the three and nine months ended October 1, 2011 and October 2, 2010, there were no fair value adjustments recorded in the Statements of Income since all hedges were considered qualifying and effective.

The Company expects approximately $8,810$7,334 ($14,44212,022 before taxes) of derivative losses included in accumulated other comprehensive income (loss) at October 1, 2011,March 31, 2012, based on current market rates, will be reclassified into earnings within the next 12 months.

Accounting guidance on fair value measurements for certain financial assets and liabilities requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

When measuring fair value, the Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs.

Fair Value of Financial Instruments

The Company’s significant financial instruments include long-term debt and interest rate swap agreements.

The fair value of the Company’s long-term debt is determined by utilizing average bid prices on or near the end of each fiscal quarter.quarter (Level 2 input). As of October 1,March 31, 2012 and April 2, 2011, and October 2, 2010, the fair value of the Company’s long-term debt was approximately $1,039,962$1,742,151 and $1,373,789,$1,250,304, respectively.

Derivative Financial Instruments

The fair values for the Company’s derivative financial instruments are determined using observable current market information such as the prevailing LIBOR interest rate and LIBOR yield curve rates and include consideration of counterparty credit risk. See Note 11 for disclosures related to derivative financial instruments.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The following table presents the aggregate fair value of the Company’s derivative financial instruments:

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

The Company has two reportable segments: WWI and WW.com. WWI has multiple operating segments which have been aggregated into one reportable segment. WWI and WW.com are two separate and distinct businesses for which discrete financial information is available. This discrete financial information is maintained and managed separately and is reviewed regularly by the chief operating decision maker. All intercompany activity is eliminated in consolidation.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Information about the Company’s reportable segments is as follows:

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)