Thank you to everyone for joining us today for Weight Watchers International’s second quarter 2009 conference call. With us on the call are David Kirchhoff, President and Chief Executive Officer and Ann Sardini, Chief Financial Officer. At about 4:00 pm Eastern time today the company issued a press release reporting its financial results for the second quarter 2009. The purpose of this call is to provide investors with some further details regarding the company’s financial results as well as to provide a general update on 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 cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in the company’s filings with the Securities and Exchange Commission. The company does not undertake any obligation 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 Mr. Kirchhoff.

Thank you for joining us as we review Weight Watchers International's performance for the second quarter of fiscal year 2009. Consistent with the trends we saw in Q1 of this year, the recession continued to have an impact on our business throughout Q2. While there were indications of improvement in the economy in certain sectors, the recession continued to put considerable pressure on consumers and their ability to make discretionary purchases. The impact of the global recession was greatest on our U.S. business while results in some other countries were relatively better, particularly in the U.K. As was the case in Q1, the impact of the economy on our business was primarily in enrollments and related to that, attendances, which in turn affected product sales. On the positive side, we saw increased penetration for Monthly Pass and retention for that plan remained at levels consistent with Q1 trends despite pressure from overall credit card default rates rising. While our licensing and online businesses are continuing to grow, they were somewhat less robust than the results we saw in Q1. Prior to reviewing the Q2 volume and financial results, I would like to remind our listeners of the various calendar and timing issues that affect the comparability of our second quarter results versus prior year. First, Easter fell into the second quarter this year versus the first quarter last year, which resulted in a later start to the spring marketing campaigns, creating unfavorable effect on volumes, and timing of marketing programs. In addition, another unfavorable timing impact came from Independence Day in the U.S., which fell into the second quarter this year as opposed to the third quarter last year. I will also take this opportunity to remind listeners that we took an adjustment in revenues and income in Q2 of…

First, recapping our revenue performance, on an as-reported basis second quarter consolidated company revenues were $372.5 million, a decrease of $27.5 million, or 6.9%, versus $400.0 million last year. There are two significant items affecting the year-to-year revenue comparison: foreign currency exchange in 2009 and the 2008 unfavorable U.K. VAT ruling. Foreign currency conversion reduced our second quarter 2009 revenues by $27.5 million, or 6.9%. In 2008, second quarter revenues were reduced by $30.3 million as a consequence of negative U.K. VAT ruling, which required us to record a revenue reduction related to prior periods in that quarter. When we exclude the impact of foreign currency in the second quarter of 2009, and adjust 2008 Q2 for U.K. VAT, second quarter 2009 revenues were down 7% from $430.3 million last year. The revenue decline is volume-related as global paid weeks are 1.7% below prior and global attendance lagged by 12.3%. Reported net income in the second quarter 2009 was $58.8 million, up 26% versus prior. However, after adjusting 2008 by $20.5 million net of tax from the U.K. VAT ruling, and eliminating from 2009 $1.2 million of restructuring charges net of tax, net income is $7.2 million, or 10.7% behind prior. Making these adjustments to EPS, Q2 2009 EPS was $0.78 compared to $0.85 in the year-ago quarter. $0.06 of the $0.07 shortfall was related to foreign currency fluctuations. On a GAAP basis, our second quarter 2009 EPS was $0.76 versus $0.59 last year. In my operations overview that follows, I will present the information on a currency-neutral basis, except as noted, and will report excluding restructuring charges and the impact to 2008 of the VAT ruling related to prior-periods revenue. On this basis, our operating income is $120.3 million, 8.5% or $11.2 million behind prior year. Our operating income…

As we outlined during our investment presentation in March, we are pursuing a range of initiatives to improve significantly our retention relevance. These initiatives include: increasing convenience in visibility through improved retail locations, as well as by keeping our centers open during selective non-meeting time slots; upgrading the functionality, look and feel of our centers; improving our programs and sharpening our meeting topics; continuing our drive to improve the quality of our service and of our service providers; and strengthening our presence on the work site. We have been making steady progress across all of the initiatives throughout 2009. To identify a couple of notable highlights: We partnered with an analytic firm to comprehensively assess every location for suitability, given our desired target audience and traffic patterns. With this analysis we will accelerate our program to either improve the terms of our lease where we are in appropriate locations, or look to relocate to better locations. And another example, earlier this year we hired a well-regarded retail design firm to help us undertake our first comprehensive center redesign effort in over a decade. This partner specializes in developing attractive, functional retail designs that are also cost effective through value engineering. We launched our first four pilot centers in Atlanta and New York this July and feedback from staff and members has been fantastic. While we will learn from these pilots and continue iterating on the new design throughout the course of 2009, ultimately we are working to create a new template that represents a step function improvement in member experience and branding while being capex neutral to what we otherwise would have paid during a location move or a scheduled retrofit. We believe that the combined efforts of all of these improvements will reflect a fundamental transformation of our core…

(Operator Instructions) Your first question comes from Robert Craig - Stifel Nicolaus.

I was wondering if you could review penetration rates by geography with Monthly Pass.

Looking at NACO it's roughly 60%. In the U.K. we're up to 52%. And in Germany and France, we're close to 70%.

Are you able to quantify at all, or you mentioned earlier that retention was improved, any way to quantify that for us?

We have not reported those types of retention metrics on past calls and so that's not something I think that a level of detail on the volumes that we would be getting into, other than to say that I would characterize the retention improvements we've seen, particularly in NACO, as slight improvements in retention, but I think considering the trends that we have been seeing, where I think we've been reporting on the past several calls, that we've been seeing a little bit of softening versus prior-year periods, beginning in Q3 going into Q4, then in Q1. The fact that that then reversed a little bit in the positive territory, we thought was very good news.

Is it possible to provide any color on the nature of some of the promotions that are being considered for the NACO market?

For competitive reasons, we're not revealing the exact nature of the promotion. For obvious competitive reasons I should say. What I can say and what you can certainly interpret from my remarks, is obviously it is in the form of a discount. I think the way that you can think about, or approach, the promotions, is consider the fact that an average retention for Monthly Pass is about 8 months. And that the overage retention for Weight Watchers Online is about 9 months. Also consider the fact that our challenge has been to try to push sort of that marginal, undecided consumer over the edge and to get them to start a weight-loss effort. And so therefore, the approach would be to try to find a way to give them an extra inducement to start as opposed to doing any discounting sort of further down their enrollment cycle. And so, from that point of view, the nature of this is that it would be the kind of discount program where it would be around the inducement of getting people started as opposed to sort of ongoing. Also, reflecting the fact that our retention has held up very well. The other thing that I should be pointed out about this new promotional approach, and I mentioned this on the last call, is that historically NACO has always promoted. They've done promotions primarily in the form of giving registration for free. As you know, with Monthly Pass registration is always free and as you know, Monthly Pass now accounts for about 60% of the NACO business in terms of enrollments. The impact of this has been, with the success of Monthly Pass, is that for 60% of our consumers we have effectively had no promotions whatsoever. And so we view coming up with a new promotion as a way of introducing and sort of replacing effectively through registration. And so in that sense you could think of it almost not as incremental. I think the other thing that's worth mentioning is that whatever we do in fall, our objective is to not just have one new promotion that works well for us, but really to spend time developing a portfolio of different promotional approaches that we can use in different times per year, which ultimately creates the possibility for us to potentially expand our advertising seasons to reflect that people are always losing weight but that we need promotional inducement to close the sale, if you will, on each piece of marketing communication we put out. And so we really view whatever we do in the fall campaign as sort of a first step in a start, in terms of the NACO business. But it is a first step in a new journey, if you will, in terms of coming up with a more comprehensive approach for creating a call to action to get people to start their weight-loss efforts.

Is it possible for you to share some of the assumptions behind the third quarter and fourth quarter promotional impact that you delineated earlier?

I think what we wanted to provide in talking about the $0.01 in Q3 and the $0.03 to $0.04 in Q4 was a reflection of the fact that if you think about the promotion we're doing, we would be recognizing all that discount, if you will, in revenue in Q3 and Q4 this year, when the promotions would fall. However, we would get the full benefit of those promotions in 2010 as those enrollment cohorts continue to expend out their retention over 8 to 12 months and beyond. What we also referenced was what we said was a slight improvement in attendance trends versus perhaps the trend we've been seeing in NACO in the first half. And so that hopefully gives you some pretty good clues in terms of the relative impact on top and bottom line.

Is it reasonable math to do this—take the $0.035 just isolating the fourth quarter, multiplying it by your share count, about 2.5 million to 3.0 million, and net income gross it up by your normal net margins, it's about $18.0 million in revenue divided by 7.0 million attendees, as an estimate, about $2.50 per attendee?

You guys are great modelers. I don't want to go into more detail than that but I think that is a way of thinking through the math. I think that it's a reasonable way of looking at it.

Your next question comes from Michael Binetti – UBS. Michael Binetti – UBS: Is there anything you could call out to us related to how trends were in July so far, quarter-to-date?

This is such a seasonally slow time of year in terms of Weight Watchers, and I'm not being coy when I say this, but I tend not to spend too much time thinking about the trends in July and August. Really, for us, we're going to be watching very closely to see what happens with the business as we go into September, particularly in light of some of the actions that I referenced during the call. Other than what I referenced, which is I was heartened by the fact that we saw some strengthening and some of the trends with the online business, which is always a good underlying indicator for the brand, and the fact that we have seen a little bit of a pickup in retention and NACO Monthly Pass in June. And the fact that we saw that again in July, we also took as good news. But I think in terms of trying to sort of read the tea leaves as they reflect a change in consumer sentiment or anything else, I'd be loathe to try to extrapolate off of what is typically such a slow time of year for us. Michael Binetti – UBS: Can you give us just an idea of what you think caused the slowdown in the Internet business in the quarter and perhaps what gives you confidence, make some data-based testing that you've seen, that gives you confidence in the new promotional efforts that you're going to see in the fall?

In terms of the dot-com business, as I referenced on the call, we had an interesting period where we were trying new continuity TV for the first time with Weight Watchers Online in June and July of last year and for a significant period of that, we were at media rates that I would argue are actually pretty high for what we normally would do. So in an effort to sort of get the economics right and everything else we sort of moderated to what we thought was a more appropriate level of media weight. And as a result of that we had sort of a little bit of predicted drop off in volume trends. Now, above and beyond that, I looked at the Weight Watchers Online performance, as I sort of think about how it looks in the U.S., which has been in positive territory through the first half and the fact that it is, although it's a lower price point than meetings, it's still a discretionary purchase. The fact that it's been in plus territory, if I think it compared to most consumer discretionary purchases, retail sectors, however you want to look at it, I feel very good about the fact that in the U.S. it's been in plus territory. The fact that it's been in very plus territory in international, I view as great. In terms of your question about promotional impact, obviously we didn't come out with some specific forecast around what we think the promotion is going to do for us in the second half, other than to say that we have been doing testing, both in the U.S. as well as observing some of our results overseas, and we do believe that the online product, like any product, really, particularly in the world of weight loss, is that sometimes when you give people enough of an inducement, it can really overcome a barrier to get engaged with the weight-loss effort that they might otherwise have put off for a year or so. And so we view this as reasons to believe that the promotional efforts for online, just as we believe they would be for Monthly Pass, that consumers would be responsive to that. But the big test for that, or sort of our first shot out of the gate, really is going to come this fall. And we'll report back on the results of that as we get to that point. Michael Binetti – UBS: Are there any metrics you can give us yet around the investment dollars or the lift that you're seeing at the new centers as you're going through and remodeling some of the system at this point?

I would say it's way too early. We opened those new pilot centers in the first two weeks in July. We just literally opened up the pilot centers in New York last week. And so it's just entirely too early. And I think the other thing is that when you come out with a new store format, any retailer would say inevitably there's just 109 different bugs you have to work out and prove usability flow, figure out which design elements are working and contributing and which aren't. What I take a lot of comfort in is that the anecdotal feedback, so while we don't have quantitative metrics, that the anecdotal feedback has been absolutely fantastic. And I think if you saw the centers you would see why.

Your next question comes from Christopher Ferrara – BAS-ML. Christopher Ferrara – BAS-ML: On the promotion, is this something that you would put in place on a permanent basis or is this something to temporarily induce people, or does it just depend on the type of results that it generates?

For whatever it's worth, the type of promotion we're talking about is not a price cut. Which is what I think would be suggested by a permanent reduction. It is a promotional discount. There are a number of different ways of doing and conveying a promotional discount. But it would be something that would be oriented around a specific period of time so a campaign if you will. And it would be something that was designed to induce trial and participation during a period of time. I don't know if that answers the question or not. Christopher Ferrara – BAS-ML: So it's got to bring with it some value, right? Maybe it's not, like to put it in packaged-goods terms, it's not going to be a reduction in the price you pay but maybe there will be more chips in the bag. Am I thinking about it wrong?

I don't know whether a consumer model is necessarily a good example because in a consumer model if I sell my product and I take $0.20 off, it's basically a full discount on the price and that's it. We're different. If you think about Monthly Pass, there's the $39.95 we charge in the first month, but there's that same $39.95 charge that continues throughout the period of someone's subscription. And so something that we would do would be focused on trial. As I think I've been sort of alluding to, it would be something that would obviously focus on say for example the first month or second month, something like that, as opposed to a permanent discount on the price throughout the subscription. And so in that case it's not a permanent price cut, it is simply a promotion. And if you think about it, it's not that different from free registration. Because what free registration does is that during non-campaign periods we charge a registration fee, then people pay for each week as long as they remain a member. A paying member in good standing. And so in the case of free registration we waive the registration fee and they continue participating. A gym might do the same thing. A gym might give half off the first month. Those are the types of things I think are more endemic with a subscription model or an ongoing service fee model, which is more the way we would be looking at it. In terms of the value for it, you would have to believe, as we would, and as we're assuming, that the lift in volume associated with that inducement, if you look at the increased volume spread over the expected period of retention for those customers, that the aggregate lift in revenue more than compensates for the revenue loss, if you will, during the initial discount. Christopher Ferrara – BAS-ML: I thought you said like it's not a price cut but you compare it to a gym membership where you get the first month free but that is a temporary sort of price reduction.

Then maybe I don't understand what a promotion is, other than that. We're not a bag of chips in the sense that we can't squeeze more things into our bag that I can think of. Although let me give you an example. From time to time, for example in France, they've done promotions where they have given away starter kits with a new enrollment. That is actually the kind of promotion and that's the kind of thing that we potentially consider within our portfolio of tools, so it can take a variety of different forms. To your point, a promotion and the way we define the term could be some sort of a value added or give away and sometimes it could be a discount. It's just going to depend on what we think is going to deliver the best lift and what is going to have attractive economics in terms of the expected revenue versus the discount or give away provided. Christopher Ferrara – BAS-ML: Also, is it something that let's say if I'm already a Monthly Pass member and I see new people coming and getting some kind of a valuable promotion, is there any kind of make good to people who are already loyal customers? How does that work?

We have. And for example, we have always had a situation where some people would historically sign up for us and pay the registration fee and then three weeks later there would be free registration. And so they would have paid the registration fee but the person who joined three weeks later didn't and they would say, okay, they weren't on sale then. So I think from that point of view, it's never proven to be an issue for us in the past. Nor have we ever done make-goods for the people who did pay for registration and we've never had an issue that resulted from that.

Your next question comes from Analyst for Gregory Badishkanian – Citi. Analyst for Gregory Badishkanian – Citi : Can you provide more color on any changes in the marketing effectiveness as the quarter progressed and maybe for July, are you seeing more favorable media rates as the quarter progressed?

As I think we've referenced on past calls, like a lot of major advertisers, particularly in the U.S., we participate in the upfront buy, which is typical of national advertisers. And the calendar period for the upfront buy, particularly for network, is September through September, so we are still in that phase of the advertising world in which the rates we're paying now reflected the conditions of last September. And what you would probably know from many of the other companies that you follow is that the networks were able to hold their media rates up. What remains to be seen is what is going to happen to advertising media rates as we go into the new season. It is not on our behalf but literally on major advertisers' behalf, they're literally in the midst of those negotiations now and there aren't any early indications of that. What we have seen is that outside—so the U.S., most of the people who are prognosticating are suggesting that there's a good opportunity for cost per GRP for TV to be down next year. It's sort of the proof is in the pudding I guess and we'll probably know that going into fall. What we're seeing outside the U.S. has actually been much more in the ways of efficiencies on media buying, so we've been having better luck overseas, where we don't have the peculiarities of how the TV advertising market is set up, as is the case in the U.S. Analyst for Gregory Badishkanian – Citi : Can you talk about the SG&A, how that's going to play out over the next coming quarters?

You're going to continue to see the benefits that we've seen in the second quarter, based on the cost efficiencies we've managed to get. So within the next couple of quarters you can expect to see at least the same as a percentage of revenue as prior year, and likely come down a bit. Analyst for Gregory Badishkanian – Citi : Has there been any impact from swine flu, maybe people aren't going to the meetings?

Absolutely none that we can indentify.

Your next question is a follow-up from Michael Binetti – UBS. Michael Binetti – UBS: Could you tell us about how the growth trends are in the at-work business that you do.

I think the at-work business has been, we've seen some similarity in trends between the at-work business and the traditional business in NACO this year. A lot of our efforts to improve the at-work business relate to the efforts that we're talking to restructuring the sales force and enhancing our sales capability. And we've been making good progress along those fronts. I think the other thing that gives us good feelings about the prospects for the at-work business going forward is that what we're increasingly seeing is that more and more employers are starting to clue into this. Obviously during this time we also have to combat the fact that a lot of companies are cutting back in lots of different places and so sort of the availability of benefit dollars and things like that, like every part of everybody's budget during a recession, are under a certain amount of pressure. But I think that I've been very pleased with the progress the team has been making, particularly recently, to push a new level of energy back into the at-work business. Michael Binetti – UBS: I heard the question about G&A trends, Ann. I think the last time we talked you said you were expecting marketing to be flat for the year and maybe gross margins to be down 50 to 100 for the year. Are those numbers still intact or have those changed?

Yes. The only issue that brings the gross margins down maybe a little bit more is the promotions, but we'll see that improvement come back in the first half of 2010. Michael Binetti – UBS: And marketing?

As I said, flat.

There are no further questions in the queue.

Thank you for joining us today and I look forward to speaking with you at our next earnings release.

This concludes today’s conference call.