Weight Watchers International Inc WTW
Q1 2011 Earnings Call Transcript
Transcript Call Date 05/06/2011

Operator: Ladies and gentlemen, welcome to Weight Watchers International First Quarter 2011 Earnings Teleconference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in the question-and-answer session and instructions will be given at that time. As a reminder, this conference call is being recorded today, May 06, 2011.

At this time, I would like to turn the call over to Sarika Sahni of Weight Watchers International. Please go ahead.

Sarika Sahni - Manager, IR: Thank you to everyone for joining us today for Weight Watchers International's first quarter 2011 conference call. With us on the call are David Kirchhoff, President and Chief Executive Officer; and Ann Sardini, Chief Financial Officer.

At about 7.00 am Eastern Time today, the Company issued a press release reporting its financial results for the first quarter of fiscal 2011. 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 on the Company's corporate website located at www.weightwatchersinternational.com.

Reconciliations of non-GAAP measures disclosed on this conference call to the most directly comparable GAAP financial measures are also available as part of the press release. 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. Please refer to these filings for a more detailed discussion of forward-looking statements and risks and uncertainties of such statements. All forward-looking statements are made as of today and except as required by law, the Company undertakes no 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 Mr. Kirchhoff. Please go ahead, David.

David Kirchhoff - President and CEO: Good morning and thank you for joining for us as we review Weight Watchers International's performance for the first quarter of fiscal 2011.

Benefiting from a powerful combination of effective marketing, extensive PR coverage and a strong new program launch, Weight Watchers enjoyed excellent Q1 results. We saw robust enrolment levels in all of our English speaking markets and our WeightWatchers.com business reached new heights with surging signup volumes, particularly in the U.S.

This more than compensated for our anticipated stock results in our continental European business. Before we review our numbers, it's important to note that our year-over-year operating results benefited from comparing to a weak Q1 in 2010.

On a constant currency basis, Q1 2011 revenues grew 28% over the prior year period, with meeting fees up 22% and meeting product sales up 25% and Internet revenues growing 65%. This increase compares very favorably to the 16% total revenue growth we saw in Q4 of 2010.

From a volume perspective, combined global online and meetings paid weeks grew by 40% in the first quarter 2011 versus the prior year period. This 40% growth was a clear acceleration of the 30% growth rate we enjoyed in Q4 of 2010.

Q1 2011 paid weeks for our global meetings business grow a robust 23% versus the prior year quarter. Paid weeks for our Weight Watchers Online product grew by an unprecedented 72% versus the same period last year.

Q1, 2011 EPS was $1 compared to $0.58 for the same period in 2010, the growth rate of 73%. I will now briefly review our results in our major geographies in business units.

First, our North American meetings business; total NACO revenues, which includes the U.S. and Canada, were $262 million in Q1, 2011, up 34% on a constant currency basis versus the same period in 2010.

Suffice to say, this is the strongest growth we have seen in NACO in many years and it represented a clear acceleration over the trend in Q4 of last year. NACO meeting fees grew by 32% in Q1 2011 versus the prior year period, entirely driven by volume growth. In-meeting product sales grew by 46% versus the prior year quarter driven by volume growth and robust sales of enrollment products.

NACO Q1 2011 paid weeks and attendances both grew at 33% versus the prior year period, driven by a higher active base of members flowing into the quarter and strong enrollments throughout the quarter. Enrollment levels in the quarter were not only up significantly versus Q1 2010, but were also significantly above 2009 levels.

Importantly, enrollments of never members in the quarter were also substantially higher than 2010 and 2009. Early last year, we began to implement our strategy to reenergize our brand in the U.S. It is important to share the sequence of steps we undertook which helped to drive our strong volume performance in Q1.

First, we refocused our message on our brand's core (strike) authenticity. After a very weak Q1 2010, we took a new and more aggressive approach to raising the visibility and vitality of our brand in the marketplace. Beginning April 1, 2010, we began to execute our strategy of showing the Weight Watchers brand in a new and much brighter (life).

As a first step we launched the new campaign featuring Jennifer Hudson, who shared her success as a Weight Watchers' member and followed this with the stories of other members in Weight Watchers Online subscribers. The authenticity of their stories and experiences with our lifestyle-based approach, clearly, resonated with the public. As a result, we saw gradually building strength in enrollments and meetings and surgeon growth in our Weight Watchers Online business throughout Q2, Q3 and then into Q4.

Second, we launched a major new program. With a re-energized brand and a foundation beginning to form, we then launched the new PointsPlus program in 2010 at the end of November. This new program capitalized on 10 years of advancement in nutritional science while building on the strong equity of points, completely revamping our highly successful program of 13 years and rebuilding the points planned from the ground up.

While based on the familiar methodology of budgeting and tracking, this program much more directly encourages and nudges our members to make healthier and more satisfying choices.

Despite the lack of advertising at that time, the program innovation launch gained considerable buzz largely benefiting from strong press coverage at both the national and the local level. As a result, we saw a significant growth in both never members and rejoining members in our meeting business throughout December of 2010.

Third, ignition, beginning December 27, we launched the new advertising campaign featuring Jennifer Hudson along with several other Weight Watchers members who all had terrific success as beta testers of the PointsPlus program.

Recognizing the strength of the advertising campaign and the buzz around the new program, we increased our media weight in January by over 15% versus the prior year period. This advertising campaign combined with the already strong buzz around the brand coming in from December resulted in full ignition for both the meetings business and the brand during the all critical month of January.

Finally, we sustained our presence. The strength and visibility around the brand continued at a sustained level throughout Q1 as a result of both advertising and PR coverage. Jennifer Hudson enjoyed significant media attention of her weight loss success and her talent, and she enjoyed exposure in key events including both the Grammy's and Oscars.

Further, she had the opportunity to demonstrate her success on The Oprah Show in February. Even better The Oprah Show showcased her success of her extended family, who were also following Weight Watchers, and as of February had lost a collective 1,000 pounds.

Finally, taking advantage of the late Easter, we also extended our TV presence to two additional Q1 weeks beyond our typical campaign period. The cumulative effort of all the above was strong enrollment growth in every month of the quarter.

For the last few years, the growth of NACO business has been constrained by the declining levels of never member enrollments. We, finally, saw a complete and full reversal of that trend in Q1 of this year. In fact, never member enrollment growth in Q1 2011 was actually somewhat higher than rejoining member enrollment growth. This was certainly not the case in our program launch in Continental Europe last year.

We believe that the growth of never member enrollments in Q1 2011 was a clear indication that our new communications strategy is working and that the Weight Watchers brand had gained significant social currency in the minds of the public to levels not seen in many years.

From my prior calls, you may recall that throughout 2010, the NACO management team took steps to consolidate its Meetings Network to allow us to focus our energies on our strongest locations, leaders and timeslots.

As a result, our meetings network excluding our at-work meetings was 12% smaller in Q1 2011 then in the prior year quarter. The combination of this plus 33% attendance growth in Q1 2011 resulted in meetings that were on average 50% busier than in the prior year period.

We saw average meeting attendances at their highest levels since 2003. This resulted in vibrant (bustling) meetings, more commissions for our service providers and set the stage for gross margin improvement for the NACO business.

We continue to be pleased with the adoption of PointsPlus program in the NACO meetings business. Weight loss results have been good despite the newness and inevitable transition challenges associated with the program change of this magnitude. Similarly, NACO monthly pass retention was consistent with the prior year period. Anecdotally, we continue to see numerous examples of our members leveraging the new program to make more helpful choices in their daily lives more consistently.

Our new program seems to have finally accomplished what none before it was able to, get Americans to eat more fruits and vegetables. Our opportunity now is to seek ways to build on the early word of mouth to continue the buzz of this important new program platform.

With regards to Q2 2011, Easter came three weeks later this year, so we have not yet completed the second week of our 2011 spring marketing campaign. We are comping against the launch of our new marketing strategy therefore, we would not expect volume growth for the remaining quarters of the year to come close to the explosives results we saw in Q1.

Nonetheless, based on the strong Q1 recruiting trends and the very early positive data from our spring campaign, as we look at the remaining three quarters of the year, we expect paid weeks growth in percentage terms in the low-20s and attendance growth in the mid-teens. This would translate to full year paid weeks growth in the 20s and attendance growth in the high-teens to low-20s.

Now, onto the International Meetings business, like NACO, the U.K. entered the New Year with both the new program innovation ProPoints and the new advertising campaign. As a result in Q1 this year, the U.K. saw significant growth in its meeting business. As a reminder the U.K. had a particularly weak Q1 in 2010 due to extremely bad weather in the first two weeks of the year last year. Q1 2011 meetings business revenues grew 29% on a constant currency basis, with meeting fees up 29% and in-meeting product sales up 33% versus a prior year period, but attendances in paid weeks were up 22%.

For the full year, we expect the U.K. to continue to see good volume trends in its business. Due to the timing of the Easter and the Royal Wedding, it is important to note the U.K. Spring Campaign got off to a four week later start compared to 2010. This will have a negative impact on Q2 volume trends versus Q1, but we nonetheless expect very solid results for the full year in line with mid-teens paid weeks growth in percentage terms and low-teen attendance growth.

Moving on to Continental Europe. As expected, our Continental Europe meetings business had a tough first quarter as a result of lapping the ProPoints innovation launch of last year. Overall, the CE meetings business revenues contracted 16% on a constant currency basis in Q1 versus a prior year period driven by softer volumes. Paid weeks for the first quarter 2011 declined by (13%) compared to prior, while attendances declines 20%.

As we shared on prior call, the CE business launched its new programs in Q1 of last year. The marketing programs surrounding the launch were not able to grow never meeting enrollments but were successful in growing rejoining member enrolments.

This resulted in a temporary bump in volume in Q1 and Q2 of last year that did not sustain throughout the rest of 2010. This combined with soft enrolment volumes in Q1 of this year drove our weak performance as we had no product news to repeat the recruitment driver of rejoins.

Given all of the success of our NACO business in attracting never members, we are aggressively looking to benefit from the learnings of that market and apply them to our CE meetings business. Concurrently, the CE teams are working on a significant version upgrade to the current ProPoints program that will give that market much needed product news.

We believe that this news combined with more effective advertising and PR will allow us to return volume growth to this important region as we move into 2012. As we continue into the year, we expect these negative meeting enrollment trends to begin to moderate following the hump of Q1 and Q2 2010 rejoins.

We expect paid weeks and attendance trends to improve throughout the year. Further, we are already starting to see strengthening volumes in our online subscription sales in CE, which we take as a very good early indicator of recovering brand strengths.

Moving on to WeightWatchers.com, the WeightWatchers.com business had its strongest quarter by far in its 10-year history. Q1 Internet revenues of this highly profitable business were up 65% on a constant currency basis versus the prior year period building on the plus 32% revenue growth we saw on Q4 2010.

Paid weeks for the Weight Watchers Online product were up 72% for the first quarter 2011 versus the prior year quarter and end of period active online subscribers were up 87%. We ended the quarter with 1.8 million active subscribers versus just under 1 million at the end of Q1 2010.

We saw robust growth and sign-ups in the U.K. and Australia, which benefited from new program launches. Despite some of the challenges of CE, we saw double-digit growth in that region as well. However, the highest growth rates by far were in the North American region where we saw historic growth rates despite Online being a relatively more mature product in this market.

The combination of greater media weight, highly effective advertising, brand buzz and a new program innovation all combined to create a compelling growth opportunity in our largest market, North America. We find this particularly encouraging as we have not yet begun to advertise Weight Watchers Online nearly as aggressively in our international markets, creating a nice additional growth opportunity for this product in 2012.

We are using the strength of the result in this business to invest back in the product development and growth. By way of example, we recently expanded our mobile footprint with the launch of a beta version of the new Android tracker application in the U.S. We are looking to further expand our mobile footprint in terms of both geographies and platforms.

We view our combination of mobile and web applications to be unbeatable when combined with our cutting-edge prudent activity programs. This value proposition has strengthened even more in our monthly pass commitment plan, which brings all of these technology tools together with a tried and true Meetings experience.

For the remaining three quarters of the year, we expect paid weeks growth of over 50% for Weight Watchers Online. As we enter the Spring Campaign, I am pleased to announce that we are now beginning to advertise behind our U.S. Weight Watchers Online for men product. We plan to invest up to an additional $15 million to $20 million in television and online media this year to support the expansion of our brand into this important demographic growth.

While men currently represent less than 10% of our meeting members and online subscriber base, they give us high marks on satisfaction with their experience with Weight Watchers. With this investment, we're taking our first serious step to begin to build awareness and relevance of the Weight Watchers brand to men.

To be clear, this is an investment in our future as we do not expect to see our traditional media efficiency as we go after this new demographic group.

Further, much of the revenue benefit from the incremental men we do (recruit) will be seen in 2012 and beyond, while all the advertising expenditures will be borne in 2011. As a result, we are forecasting an approximate EPS hit of about $0.10 associated with this new initiative. This was not part of the original earnings guidance we provided at the beginning of the year, but is incorporated in our updated guidance for the year.

Now, I'd like to turn the discussion over to Ann, who will elaborate further on our Q1, 2011 performance.

Ann M. Sardini - CFO: Thank you, David and good morning everyone. The first quarter of 2011 was a high water mark for revenue and net income for Weight Watchers. Our first quarter revenues reached $503.4 million, an increase versus prior of 29.8%. Favorable foreign currency exchange added 1.4% to our revenues in the quarter. Net income in the quarter grew by 65% to $73.6 million, an increase of $29 million above the Q1, 2010 level and EPS in the quarter was $1, up $0.42 from $0.58 last year.

Looking at an overview and then at some of the details of our operational results; our operating income growth exceeded revenue growth in the quarter with operating income of $135.7 million increasing by 48.5% or 47% in constant currency over the prior year quarter.

Our operating income margins grew by 340 basis points in the quarter to 27% versus 23.6% last year with the following as key drivers – volume growth in our businesses enabled gross margin accretion of 170 basis points; our marketing worked hard for us driving significant volume growth at lower cost per acquisitions in both the meeting business and the online business, and we gained operating leverage at the G&A levels despite investing in business development areas.

Looking at our global volume trends and their impact on our financial results, as David noted, we came into the first quarter of 2011 with the significantly higher customer base than at the beginning of 2010. Our monthly pass customer base was 16.5% higher and our end of the year 2010, Weight Watchers Online active were up by 38.2%. Recruitment in the first quarter was exceptionally strong as well.

As a result, global paid weeks increased by 39.7% in the first quarter versus prior reaching $48.5 million. Q1 2011 was the fifth consecutive quarter of global paid weeks growth. Global attendance was up 20.3% versus prior, supported by strong recruitment of both new and returning members, as the new program launches and other initiatives drove NACO attendances up 3.1% and U.K. attendances up 22.2% for the quarter.

The Online end of period active subscriber base which had been growing steadily in 2010 had reached 1.8 million by the end of the first quarter 2011, an increase of 86.6% over the Q1 2010 levels. The impact of these strong volumes was to drive constant currency revenue growth of 22.8% in the total meetings business and 64.9% in the WeightWatchers.com business and to increase growth margin to 56.2% up 170 basis points.

In the discussion as follows, the growth percentages that I cite will be on a constant currency basis. Meeting fees and in-meeting products sales combined rose 22.8% in the first quarter to $370 million, driven primarily by the innovation launches and successful marketing campaigns in NACO and the U.K.

Meeting fees were $268.9 million, 21.9% ahead of prior. NACO's meeting fees were up 31.6% on paid weeks growth of 32.6%, while U.K.'s meeting fees rose 28.6%, with paid weeks growing 21.9%. These increases were partially offset by performance weakness in Continental Europe.

In-meeting product sales benefited disproportionately from the new program launches, which as many existing members purchased program guides and starter kits, which are typically sold primarily to new enrollees. Per attendance in-meeting product sales rose 9.5% in NACO and 8.6% in the U.K.

In total in-meeting product sales were $101 million globally in the first quarter, up 25.2% versus prior. Revenues in the WeightWatchers.com business grew 64.9% in the first quarter to $92 million on the strength of 72.3% paid weeks growth. Signup growth was particular strong in North America and the U.K., but we had growth across all major market.

Our other revenues are comprised primarily of licensing and franchise royalty revenues, revenues from the sale of our products outside of the meeting room and revenues from our publication. Our other revenues were $41.5 million in the first quarter, an increase of $7 million or 20.2%, 18.6% in the currency neutral basis versus the prior year quarter.

Most of the increases in other revenues resulted from benefits of the program innovation. Franchise commissions and sale of products to our franchises were up a combined $2.7 million or 38.9% on the strength of the North America program innovation.

Our by mail product sales and revenues from our publications rose 28.4% or $3.5 million over the prior year quarter level, also spurred by the new program innovations around the world. Licensing revenues were $16 million in the quarter, an increase of just 1.8%, while licensing revenue did increase in the U.S. and the U.K., Continental Europe's licensing business lost ground.

Our gross margin was 56.2% in the first quarter, 170 basis points above last year's level. The increase was driven by gross margin accretion in the WeightWatchers.com business were robust growth, such as we experienced in the first quarter comes with minimal variable cost, as well as by differential growth in this higher gross margin business. In the meetings business, we experienced an increase in our average attendance per meeting of 22.3% which drove meeting gross margin accretion despite some actions that we took in the quarter to ensure a successful launch of the new program.

Among these were temporarily increasing staff levels in our meeting rooms and call centers to enable us to better explain the new program to our existing, as well as to new members. We also upgraded meeting collateral and in addition, the quarter included non-recurring expense, as a result of the need to distribute new program materials to existing members rather than just to new enrollees, because of the program changeover.

While net of these expense items, gross margin excluding product sales expanded, the impact of our innovation product sales strategies further reduced meeting gross margins, with the results that in total it was effectively flat to prior year. The temporarily discounted product to encourage the purchases of enrollment related items by all members in the innovation market. The temporary discounting strategies were effective, as reflected in the growth in in-meeting product sales for attendance in our innovation markets. These actions were related to the innovation launch strategies. For the rest of the year, we expect the meeting gross margin to expand in comparison to prior.

Marketing expenses for the first quarter of fiscal 2011 were $95.7 million, up 27.7% or $20.6 million versus the first quarter of 2010. We increased our offline marketing spend by 20.8% across all of our key markets, with particular focus on the innovation launch countries. This proved to be a successful strategy in driving recruitment of both customers new to Weight Watchers and returning members.

In the U.S. meetings and Online businesses for example, we increased marketing investment in support of our program innovations by (up waiting) during the winter TV campaign and by adding TV continuity weeks. Our Internet marketing spend increased by 58.6% driving increased traffic to the website.

This resulted not only in significant growth in Weight Watchers Online signup, but also contributed to growth in the meetings business and generated higher exposure to the branch generally. Despite increasing our marketing globally our cost per customer acquisition declined by 19% in the meetings business and by 31% in the Online business.

Marketing expenses as a percentage of revenues were 19% in fiscal 2011 first quarter as compared to 19.2% in the prior year period. Selling, general and administrative expenses were $51.7 million for the first quarter of 2011, an increase of 11.5% versus the first quarter of 2010. We incurred higher consulting fees associated with business development, higher technology-related expenses including for the development of mobile applications and higher salary expenses associated with business performance and growth including higher bonus expense.

Selling, general and administrative expenses as the percentage of revenues for the first quarter declined to 10.3% from 11.8% in the first quarter last year, providing 150 basis points of operating income margin accretion.

Moving now to interest expense, which was $18.2 million in the first quarter; interest expense was down marginally from the prior quarter by $0.5 million or 2.8%. Our effective interest rate increased slightly to 5.03%, up from 4.95% in the first quarter fiscal '10. During the quarter, we reduced our debt by $114.1 million bringing our debt balance to $1.25 billion and our trailing 12-month net debt-to-EBITDA to 2.48 times.

Our cash flow from operations in Q1 2011 was $201 million before interest payments. After capital expenditures of $6.5 million, we had $194.5 million of free cash available to service our capital structure and return cash to our shareholders.

We paid our quarterly dividends of $13 million and repurchased 34.9 million of our stock leaving us with 73.7 million shares outstanding at the end of the first quarter. In addition, we made interest payments of $16.9 million and reduced our debt by $114.1 million.

Now, I'll turn it back to David.

David Kirchhoff - President and CEO: Thank you, Ann. We're obviously very pleased by the results of our NACO U.K. and WeightWatchers.com businesses in the first quarter. Of course, we recognize that some of the strengths is a reflection of having a weak comparable from the previous year. Nonetheless, what we are seeing in these businesses is very encouraging and energizing for the Weight Watchers organization.

Despite the success in Q1, our management teams continue to focus their attention on sustaining growth for the rest of 2011 and more importantly, setting the table for strong growth in 2012 and beyond.

Growth in 2012 and beyond is going to come from a combination of, one, products and services innovation; two, high impact in ever present marketing; three, retail transformation; four, opening the healthcare (channel).

Here is some early updates on our progress on some of these key areas. Products and services innovation, we've seen the value of providing innovation in product news to our business on full display this year. While we do not have any near term plan changes of the magnitudes of the PointsPlus launch, we see multiple opportunities to make meaningful integrations across all of our lines of business.

On the program side, we're planning for a major upgrade to the CE ProPoints program and meaningful enhancements and version upgrades to the U.S. and U.K. programs for January 2012. Further, we're looking to accelerate the pace of technology innovation and functionality platforms in geographic reach. Our new Android application is just one example.

Retail transformation, with the successful launch of our pilot markets in Tampa and St. Louis, we're now proceeding with the process of fully upgrading our entire NACO fixed retail center network. We expect to have addressed approximately 60% of our stores by the end of this year, with much of the remainder being completed in 2012.

We believe that these better retail locations combined with stronger center branding will be an important growth driver for us in 2012 and 2013. We also believe that it will create new service offering, innovation opportunities ranging from allowing (vans) during non-meeting times to simple things like replacing food charts with flat screen TVs, further increasing the appeal, (redunity) and convenience of our meetings.

Opening the healthcare channel, Weight Watchers has a big role to play in helping employers and other payers control the hundreds of billions of dollars of expenditures in lost productivity attributable to obesity and unhealthy lifestyle. Overtime, we believe we can continue to grow revenue from this channels from the tens of millions we have today to hundreds of millions.

Much of the team's efforts so far this year, has been to create the right product offering as well as the right service and sales platform necessary to position us for growth in this important new channel. For example, we are actively working on a version of monthly pass, especially customized for the corporate channel. We've also continued to build our sales capability with the addition of new national sales reps.

We're also hard at work to ensure that we have the right IT systems necessary to support the reporting needs of this channel. In the interim, we continue to get excellent response from the major corporate prospects that we have contacted and we have already secured several promising new account, despite taking a very conservative sales approach so far, while we develop our offerings in systems foundation.

Guidance; with the strong financial results of Q1, we've taken the opportunity to make additional investments in the business to allow us to secure a continued growth in 2012 and beyond. Examples include, the aforementioned marketing demand, the acceleration in technology development and our center locations upgrades to allow us to more aggressively capture or growth opportunities.

Despite these investments, the strength of Q1 and improving expectations will result in full year financial performance above what we had originally forecasted. Accordingly, we're raising our guidance range from $3.75 to $4 for fully diluted share for the full year versus the previously provided EPS guidance range of $3.50 to $3.85.

At this time operator, we would like to take questions.

Transcript Call Date 05/06/2011

Operator: Gregory Badishkanian, Citigroup.

Gregory Badishkanian - Citigroup: Great result, guys and just as a follow-on David you had talked about a lot of investments that you are making this year for 2012. Do you think you'll be able to get some growth in 2012 off of the tough compares from 2011 with all the investments you are making this year?

David Kirchhoff - President and CEO: Yeah, we feel very good that, if you think about the things that we were doing this year, for example when we went through that recipe or sequence of events to drive a really good Q1 outcome. We look at that as sort of a good guide if you will to the way that we're going to continue approaching our business. I think what we believe is that the combination of innovation combined with really effective marketing and the strong cut through in a way that sort of captures the uniqueness of the Weight Watchers approach is a process that we can continue repeating with each passing year and that by itself is going to be an important way for us to continue pushing the business forward in both meetings enrollments, as well as online signups. I think beyond that, if you think about the work we are doing with the retail transformation, that's going to create additional growth opportunity going into 2012. Then as we get into 2012 and in particular as we start pushing in to 2013, we really believe that this healthcare channel is going to open up an entirely new way of getting people engage in a Weight Watchers process in a way that we believe is sort of uniquely ownable and capturable by Weight Watchers.

Gregory Badishkanian - Citigroup: It seems like you are investing a lot this year because you can afford to do that and you've raised guidance some, but maybe not as much as I would have thought just given the upside for the quarter. So, I'm assuming that you're really just using this year to reinvest back in the business for 2012 and not that necessarily that the momentum has slowed down significantly over the last month or two, right?

David Kirchhoff - President and CEO: I mean, no. I mean to be clear, as you've heard in the prepared remarks, Q1 truly did benefit from a fairly or from a relatively weak comp in Q1 of last year, but nonetheless, the results were good and I think as you've also heard we had good expectations for the remainder of the year, particularly as we look at NACO and the dotcom business. But as you also heard for example, we sort of jumped into the opportunity to really begin pushing on our presence with men, which we had never done before. Knowing that just by itself was going to be a $0.10 hit on EPS, accelerating the rollout of our retail networks, continuing to sort of push even more aggressively on software product development and lot of other areas we think is going to be critical for our growth. So we are actively looking to make those investments, but we feel very good about the way that we see the year shaping up and we feel better about what it looks like going into the years that follow.

Gregory Badishkanian - Citigroup: Good, I just wanted you to clarify that. That's very helpful. Then also just on looking at maybe who you are taking share from. NutriSystem also saw a market share gain throughout the quarter in April. Is it just from people who are doing it on their own that were not successful or are you taking it from other commercial weight loss programs? Where do you think those customers are coming from?

David Kirchhoff - President and CEO: I think the thing you have always have to go back to, the fact that you always have to go back is 8 out of 10 weight loss attempts are people just trying to kind of do their thing. So, I think if you look at us from a competitive context with other commercial weight loss programs, what we have going for us now more than ever is that the combination of having a strong meetings business and a strong Weight Watchers Online business and now that we're trying to push out for Weight Watchers Online for men is giving us multiple opportunities to profitably invest in marketing. The net impact of this is that, I think if you look at our share of voice now in terms of our presence in the advertising marketplace and certainly our presence in the media, is you know we probably have the stronger share of voice like this minute that we've had in quite some time and we think that this gives us a very nice additional advantage over some of our commercial competitors. But we would also argue, (they) have less of a life style-based approach than we do, and so, this really allows us I think to kind of capture more opportunities in some of those, potentially the expense of our commercial competitors. But really, if I had to estimate sort of where most of the volume is coming from in terms of new people coming into the fold, I would suspect that a lot of it is coming from people who otherwise were doing their own thing and it's that 80% that really represents the biggest growth opportunity and that's where we see our growth opportunities going forward.

Gregory Badishkanian - Citigroup: Finally, program makes lot of sense. It's a nice innovation from the last one and feedback from your customers and kind of their weight loss, I mean are you seeing some nice improvements in terms of weight loss versus the old program.

David Kirchhoff - President and CEO: Well, I think what you heard in the prepared remarks is that we're very satisfied with the weight loss results we're seeing. The important thing for us when we develop this program, which I would argue is even more than nice. What actually quite important is that it allowed us to really much more push into the future, which is around balanced nutrition, real food and in directing people towards food that is more nutrient-dense, less calorie-dense and more satisfying. We think that this is where the future is in terms of addressing the obesity epidemic and we're absolutely in the center of that and we're in a far better position to be a good partner in addressing the obesity epidemic with this program than we were with any previous program and certainly better than any other weight loss program that's out there by far, certainly compared to Fad Diets. The thing when we design a program from a weight loss perspective is we weren't looking to increase the average weight loss per week. That was never the objective. I think it's important that we continue to do what we've always done, which is direct our members and help them achieve sustained but appropriate levels of weight loss to ideally targeting one to two pounds per week, not more than that. The markers, frankly, that we're looking for more are some of the things that you heard me reference in my prepared remarks, which is directing people towards more healthful choices and in that case, we're absolutely seeing over and over and over again. Our members are saying that they instead of reaching for the 100 calorie bag of cookies, they're reaching for an apple and we really believe that these types of changes are going to be the ones that are most important in helping guide our members and everybody who comes to us to more sustaining and more nutritious choices, so that they can once and for all forget the process of dieting and start focusing on the process of adopting a healthy lifestyle.

Operator: Chris Ferrara, Bank of America

Chris Ferrara - Bank of America: Dave, I think you said something to the effect that recruitment was higher with never members than rejoins, and I was wondering if you can put a little color on that. I expect that's a percentage, right. I mean I imagine there were still more rejoins in the meetings and there are never members right, but if you can talk about that and then also can you talk about – I know it's early days, but what's your sense of the retention level of the never members, because presumably you're getting a whole new class people in here, obviously that have never been there. I mean do they behave the same way that your existing members do?

David Kirchhoff - President and CEO: Yes, in fact, you interpreted my comments on the nevers and rejoins absolutely accurately. When you look at the growth rate of nevers share number of enrollments this year versus last year and you look at that percentage growth rate, that was a little bit higher than the percentage growth rate on rejoins. Rejoins means the fact to consider with the NACO business is that we had such a large installed base of people who know us and come back to us to get reenergized on the program that rejoins are still a relatively higher percentage of our total enrollments, but really we do never enrollments as kind of a key catalyst to drive in future growth. One of the things you get with never enrollments by the way is that if you can rebuild your base of never enrollments, those are people who often will come back for a recharge if you will in the following year. So, in other words driving never enrollment growth was important for driving long-term rejoin enrollment growth. So, it's very much a mutually reinforcing model. In terms of reaction to the program, interestingly particularly with this new program and as you heard me reference, any time you launch a program shift of this magnitude, it's going to be a big change for example the people that were with us at the end of November, who changed over literally in the course of a weekend were going from old points to new points if you will. whereas people that were coming brand new to us had never known the old points program and what we've seen is those people have really taken to the new program in a really nice way. What we also tend to see is that retention characteristics for new people for never members if you will can often sometimes be a little bit stronger. Certainly, you can have some people who come in who may be less informed of what Weight Watchers is and everything else, but again if you look at net retention for monthly pass, the cohorts that we're enrolling during January, February, March of this year and you compare their retention patterns versus the cohorts that we're enrolling January, February, March of last year, it's very consistent despite some of the temporary transition issues with rejoins.

Chris Ferrara - Bank of America: My guess would be that the one never members come in they are more inclined to join on monthly pass right because, you're rightly get the enrollment fee waive right and then it just makes sense financially. If that's the case I guess I look at meeting if we're trying to quantify the impact of the promotion that we're in this period right, and you look meeting fees per attendee that were flat in a period where I would have thought, maybe the monthly pass penetration would have gone up given the big influx of newer members I guess. Can you just talk a little bit about that and where I may be thinking about it incorrectly?

Ann M. Sardini - CFO: Realize though that, if monthly pass goes up, it's a discounted product so, you're going to get a negative, I don't want to use the word negative, but you're going to get a lower meeting fee per attendee than if all of the people who came in the door were pay-as-you-go people. So, especially if you have what you do have in the early days if somebody is signing up, they are attending all of the time. So, you are going to get some lecture income per attendee perspective, you're going to get a little pull down on that.

David Kirchhoff - President and CEO: But Chris, your other point is I'm not sure that there is a difference in monthly pass adoption rates between never enrollments and rejoin enrollment, I don't think that's actually the case (keeping) fairly consistent.

Ann M. Sardini - CFO: Though I think you probably had people moving, people who are existing members also moving into monthly pass. So, that's another piece of the puzzle.

Chris Ferrara - Bank of America: Then I guess finally over to the Online business, I guess can you put a little color around the differences that we see between paid weeks and revenues and then end of period Online subscriber's right. It would seem that the online subs end of period could be a leading indicator not a lagging indicator. I'm just curious how you think about that and how you reconcile the difference in growth rates between the two?

David Kirchhoff - President and CEO: Yeah. You're exactly right the end of period paid weeks is going to be a leading indicator because if you think about paid weeks for the entire period, it's going to be the average on some level of what you start with and what you end with. So if what you end with is higher than what you start with, it suggests that your base increased over the course of the quarter and that is in fact, what we saw with Weight Watchers Online. In terms of reconciling paid weeks to revenues, one of the things, one of the sources of revenue that is included within Internet revenues is advertising sales from our website. We're up very nicely in the quarter, but not nearly to the same extent as paid weeks work and so that resulted in the growth rate of overall revenues being a little bit lower than the paid weeks growth rate.

Chris Ferrara - Bank of America: I guess kind of following up on that. To the extent that you had 86%, 87% online end-of-period subscribers, why would online paid weeks decelerate over the rest of the year? That looks like we're walking into Q2 with the bigger population of people online now.

David Kirchhoff - President and CEO: That is absolutely helping, starting with the higher base of subscribers. I think there is a couple of things happening for example, if you look at Q2. First off, there is the effect of Easter, so this means that we were dark, if you will, in terms of both advertising and promotion for full two weeks, whereas by the time we turned advertising back on for Weight Watchers Online and promotion back on, we were already three weeks into our spring campaign of last year. So, that's the first factor. The second factor is that as you recall, if you go back to Q2 of last year when we re-launched the advertising program for Weight Watchers Online, during that time, really beginning in Q2, going in consistently through Q3 and Q4, we saw a huge shift in signup growth rates. It took a little longer for it to show up in the paid weeks, because we were basically – signups are going to be the most leading indicator that takes a little while to build your membership base pack-up, but we're now on a point where we have online signups that are comping a much higher growth rate and a very strong growth rate in Q2 versus what we had in Q1. Meaning, Q1, we had signup growth but not nearly to the same degree that we had throughout the rest of the year. So the fact that we're actually seeing growth rates continuing to sort of push nicely above what we had seen from the higher base of growth in Q2 of last year early days, we view as a very good early indicator, but as you get into this sort of odd territory were 50% growth in paid weeks somehow feels like deceleration, but I think in the scheme of things, it's still a pretty great growth rate.

Chris Ferrara - Bank of America: I would agree.

Ann M. Sardini - CFO: Just to kind of follow up a little bit. We had online signup growth in the first quarter of last year to 6%, it went to 40% in the second quarter and then 30% and then 60%. So, the comps really changes dramatically when you get to the second quarter of this year.

Operator: Kurt Frederick, Wedbush Securities.

Kurt Frederick - Wedbush Securities: I was wondering, could you discuss your plans in regards to the recent acquisition you did the other half of your JV in China?

David Kirchhoff - President and CEO: Kurt, we continue to believe and we see this over and over again that obesity is the health issue, (is sadly) becoming a health issue around the world and it's almost shocking to see the fact that obesity is even becoming an issue in impoverished nations, in places like Africa, and certainly as we look to places like China and we see other emerging economies, we see obesity becoming a bigger and bigger issue. As we look at that I think for the long term, we think it's going to be very important for us to continue identifying ways of really being masters of our own destiny. So, it's hard for me to imagine that anything it's going to be more core to our future over the 5, 10, 20 years than emerging markets and that's going to be a somewhat different priority than for our excellent partners who helped us get the JV started – Danone. It's not one of their core businesses. It is a service business and that's generally not the business that they are in and so they've made the decision to focus on their key growth pillars, we're focusing on ours and this basically puts us in full control of our destiny.

Kurt Frederick - Wedbush Securities: Just moving on to Europe, I wonder if performance in France, is that still being impacted by the other Dukan diet and then is that diet impacting any of your other markets?

David Kirchhoff - President and CEO: I think that the Dukan diet is still a factor in France. In a timeframe, it's not inconsistent with the Atkins diet that we saw in the U.S. back in 2003 and 2004. We would expect that over time that that particular fad will go through the same path that it did in the U.S. and we'll eventually recede, if you will. But for right this red hot minute, he is still very much on the scene in that country. I think though in that context, I think our French team has done an excellent job. For example, they've been very successful in getting growth back into the Online product. They are continuing to push some great initiatives in terms of driving their business forward even in the face of a fad like his. What we have also have seen is that more and more we'd see help authorities including the French government, British Nutrition experts and then certainly as he has brought his book to the U.S., there has been a pretty steady chorus of nutrition experts and scientists who have really asked the question, why do we need another unsustainable fad diet and we've already been through this process. What we're seeing more and more is that there is a tremendous need for programs that focus on balanced nutrition, not programs that ask you to wipe out entire food groups which we just know from history and from research is just completely unsustainable. So, I think that the nature of the weight management world is that fad diets like this are reality. They do come. They always have kind of this immediate temporal appeal. It does tend to go away. I have full confidence that our French team is going to weather their way through this and come out the other end even stronger. We certainly feel that our position is strong in all the other countries where we operate.

Kurt Frederick - Wedbush Securities: Then on the retail transformation, I think you said 60% by the end of the year. Previously, you had talked about a couple of markets where you saw a lift after that entire market was complete. I don't know if there is any other markets that are now (down) and then if you've seen kind of the same phenomenon?

David Kirchhoff - President and CEO: No, because we're not taking that approach to building it out. The reason we did the market test in Tampa and St. Louis was two-fold. First off, we want to see what kind of lift we're going to get and get a sense of ROI, which is really hard to get a beat on until you do a full market conversion. Then secondly, we also want to better understand kind of the operational implications to converting over almost unnatural number of centers in a given market to basically learn where all the (kings) were in terms of executing that kind of a program. Now that we've gotten all those learning, now that we know that the economic return is there, the approach we're taking is not flipping entire markets over, but rather focusing on when leases are coming due and expiring, which means that across the rest of the country, the full market conversions really won't happen by and large until the end of 2012. So, it's not going to be apples-to-apples that way. It's going to be more of steady process as oppose to individual markets where we're breaking leases and things like that.

Operator: Ken Goldman, JPMorgan.

Ken Goldman - JPMorgan: Ann I had a couple of questions that are more on the financial variety. Number one, would you ever issue secondary stock to pay down debt? Number two, would you ever split your stock? Number three, can you update us on the long-term commitment of the Artal folks to holding your stock? It's been a great investment for them recently, and I'm sure they're in it for the long-term, but it is something that some investors are talking about little bit more right now.

Ann M. Sardini - CFO: These are the questions that I can't answer. I will just say that, in terms of our debt we generate plenty of cash from operating activities, so there is really no need for us to take any other extraordinary measures to pay down debt. In fact, as you know, we are down to 2.4, 2.48 net debt-to-EBITDA and by the end of this year, we'll be below two times. So, I don't think there is any need to consider any other approach there. In terms of our Artal's plans I think you have to ask Artal. Sorry, what was your third?

Ken Goldman - JPMorgan: Would you ever split the stock?

Ann M. Sardini - CFO: I mean that's not certainly something we've talked about publicly at all. So, I really can't comment on that either, sorry.

Ken Goldman - JPMorgan: Then I guess question for David, this is a knit picky question and otherwise outstanding period, right. I understand that meeting fees per paid week are down as interestingly Weight Watchers rises, because you are discounting a bit to get people in as you mentioned and that make sense. It's been a metric that's been down for two or three years now, so it is possible there is something else to consider in our analysis there, I'm guessing it's the result of some real unusual volatility in the economy and so forth, and as things normalize your trends will improve?

Ann M. Sardini - CFO: Just to clarify for a second. Meeting fees per paid week on down, it's meeting fees per attendant that you might see some decline in, because more people are taking up monthly pass, but even there we're really not seeing a decline in terms of – I missed focus I guess. Meeting fees per paid week are a function of the fact that more people are moving in to monthly pass, discounted product. If you look at total revenue, you're getting a tremendous lift in total revenue from the fact that we have much longer retention on the monthly pass product. So, if you were to look at meeting fees per attendants you would see the lift there, a function of people buying monthly pass and not attending every single week that they are paying for. So, that's the way, I'm not sure…

David Kirchhoff - President and CEO: I think what's interesting Ken is that we've heard a couple of our commercial competitors in commenting on our results in the beginning of the year have suggested that we've been engaged in kind of heavy promotional activities. Let me just say right now that it is absolutely not the case. We're running exactly the same promotion in Q1 that we ran in Q1 of the year before and frankly Q1 for 10 years before that, which was basically free registration. And so we have not been really using different promotional scheme for meetings with a couple of exceptions, but again as Ann gets back to really sort of some of the changing around has much more to do with monthly pass penetration.

Ann M. Sardini - CFO: Also, the other piece is, as you see the WeightWatchers.com business growing and you look at total Company paid week and you see a shift because the WeightWatchers.com product is less expensive than the meetings products, so you might see a little bit of a shift there just because you get any bigger uptake on the dotcom product as a percentage.

Ken Goldman - JPMorgan: So, it's natural then as things progress for metrics such as at or things like attendance for paid week or the dollars per subscriber online, for those things to slip a little bit, it's not something that you would look at as a concern at all?

David Kirchhoff - President and CEO: No, and actually the dollars for online subscriber are not slipping. So, let me just make sure that we're using all the same language. We're getting the same retention for Weight Watchers Online that we've always gotten, which give or take is nine months, if anything we've been taking price up just a little bit, but we've been taking price up with Weight Watchers Online. And so if you look at revenue recognize for a typically monthly pass subscriber for their subscription cycle of revenue, for a typical online subscription cycle, we're really not seeing tremendous differences in those and nor do we expect to see going forward. The only thing that you might see is that there has been this continuing shift that began in early 2006 and continues to stay, people moving away from pay as you go toward monthly pass. And then online as a percentage of total corporate revenue is obviously greater, but if you look at kind of revenue recognitions for online revenue versus online paid weeks, you are not seeing tremendous differences.

Ann M. Sardini - CFO: Just as an example, online paid weeks were 35% of total paid weeks in the first quarter of last year to 43% of total paid weeks in the first quarter of this year. So, that's going to have an impact.

Operator: Bob Craig, Stifel, Nicolaus & Company.

Robert Craig - Stifel, Nicolaus & Company: Just a couple of questions regarding the efforts to attract the male population. Is WeightWatchers.com the primary vehicle by which you intend to do that as opposed to the meeting or is that not the case?

David Kirchhoff - President and CEO: Right now it is. We think that the Weight Watchers Online product is very easy gateway product into the brand for men. That being said, I've met more than a few men, in fact quite a men who go to Weight Watchers meetings, who swear by it and have had a terrific experience. They often go with their spouse, but we think over time there is a chance to change that, but I think the first step is getting men comfortable with the brand and comfortable with the approach. And again, what we see is that I've seen this personally over and over again, when men do Weight Watchers, when they sort of – they kind of learn about the points program, they actually start using it, they really take to it and they succeed on it and it makes sense for them. It's logical, they get it and, frankly, by the time they come up the other end, they don't understand how anybody could ever do anything else. It's just that the historic brand association has been with women and so it's really a process of sort of changing and getting past some of those perceptions. What we find is that the Weight Watchers Online for men is an easy way for them to kind of (ease) into it. Over time we see tremendous opportunities to grow our appeal for men both with our online product and our meetings product.

Robert Craig - Stifel, Nicolaus & Company: I suppose you can start holding meetings in sports bars, but I don't think that's the horizon.

David Kirchhoff - President and CEO: I just took a note on that.

Robert Craig - Stifel, Nicolaus & Company: Any early read or early results, I have seen the advertisements, anything to report there?

David Kirchhoff - President and CEO: Happily as I turned on CNN early this morning, I saw one too. It's too early days, but I think as we get into the next call, we'll be able to report back. I've met a few men already who have said they had recently signed up, so I think that's a good indicator, but it's not particularly statistically valid.

Robert Craig - Stifel, Nicolaus & Company: Normal seasonal split to that $15 million to $20 million incremental advertising or was that being front-loaded here?

Ann M. Sardini - CFO: Well, it's pretty normal seasonal split, yeah.

Robert Craig - Stifel, Nicolaus & Company: Dave, you didn't quantify, but I think that Continental Europe for the year is still expected to be down. I think your prior guidance was high single-digit, low double-digit, is that still a pretty good read?

David Kirchhoff - President and CEO: Yeah, I think so.

Robert Craig - Stifel, Nicolaus & Company: The expenses associated with the real estate effort this year and next, care to quantify those?

Ann M. Sardini - CFO: I mean, as we said a couple of time, it's more of a cash – pulling forward cash to accomplish – in CapEx to accomplish more of the renovations and retail transformation. In terms of what you'll see from a P&L perspective because of the way we've reorganized ourselves, because of the fact that we're moving centers and we're probably going to have fewer centers, you shouldn't see any impact on the actual kind of rent expenses or percentage, so no margin impact.

Robert Craig - Stifel, Nicolaus & Company: Is there any way that you could size up the corporate efforts as it now stands and the growth rate of that effect?

David Kirchhoff - President and CEO: The way to think about our healthcare revenue is that we start with an existing book of business, which is our At Work meetings, and as you know, that's historically been about 12% of our North American attendances and that was, as you probably recall, the At Work meetings were sold kind of ground level (telesales), 25 people of the company get together and give us a call and say, can we get a meeting at – the Weight Watchers' leader to come into our office and give a meeting on site. What we call our national accounts, of which we have a couple of great examples now. They are actually pretty sizable accounts. It's still such a nascent business and it's such a relatively smaller portion that any of the growth rates that we would be experiencing now would look astronomical, but it's off of the tiny base. I think as we get more and more into – and the way I would think about the corporate business is that, particularly, that kind of selling at the corporate level and sort of bringing in large major accounts is that 2011 is really about building foundation. So that's getting the products right, getting the sales in operational aspects of that channel right and making sure that we have the right reporting systems. So, it's a lot of foundation building this year with an eye toward allowing us to then kind of open the spigot, if you will, in terms of brining in accounts as we go into 2012 and '13.

Robert Craig - Stifel, Nicolaus & Company: Are you contemplating any price adjustments, price increases?

David Kirchhoff - President and CEO: It's a great question, because if you look at monthly pass, we're at $39.95 which is where we were in 2006 when we first launched at the end of 2006, and we haven't done anything with that since particularly in our largest market, the U.S. Certainly, during the recession we didn't feel that it was prudent to take any actions like that and I have to say, I mean if there is – I didn't address it in my prepared remarks, but we are like everybody who's in a consumer-facing business, we continue to be a little bit concerned about what's happening out there with gas prices and with food prices and lot of other non-discretionary inflation items going up. We're mindful of that, but over the long-term and potential medium term, we certainly see a lot of headroom for growth in terms of recognizing more value and potentially taking pricing, but we want to do it in a way that it's in sync with where the consumer is.

Robert Craig - Stifel, Nicolaus & Company: Last one, I know this is probably unanswerable, but you guys have been in this business a long time, any thoughts on the staying power of a marketing campaign and/or the popularity of the spokesperson?

David Kirchhoff - President and CEO: When I look at the approach that we took, which is combination of combining innovation with strong marketing and powerful marketing. If I look for example on the innovation side, I see no shortage of opportunities of continuing to innovate and improve the things that we operate and that can be in program, it can be in technology, it can be in different service configurations. So I think product news is something we can always have. I think if you look on the marketing strategy, really the shift that happened last year was us going back to kind of our core historic roots of driving authenticity through the voice of our members. And we believe that in a way that really only Weight Watchers could do this that way. And so, we believe that that is a recipe and approach that works very well for us that we can continue to repeat and provide year after, year after year and we can continue to find new compelling ways of delivering that authentic voice. Sometimes that's going to be in the form of the celebrity. Sometimes that's going to be in other ways. But I think in terms of staying power, frankly we don't have so many examples, but Sarah Ferguson, the Duchess of York was a tremendous example for us and tremendous help for our business for many years. And we continue to see lots of different ways that for example we can work with Jennifer to find new ways of inspiring the population that they can make this amazing change in the life. I had the pleasure that she actually came through the office yesterday and made an appearance at our own internal at work meeting. Suffice to say, it was the most populated network meeting that I've seen in our office in quite some time. But in listening to her talk about, she talked about her experience tracking points and she is just such a beautiful (jobber) in conveying it and the reason is because she really does it. And I think that the realness of her approach is the thing that connects with the people, because she is a Weight Watchers personnel. She thinks about points, she counts, she thinks about different food choices and I think that kind of authenticity does inherently have good staying power.

Operator: Chris Ferrara, Bank of America - Merrill Lynch.

Chris Ferrara - Bank of America: So, I guess, David, sounds like you talked a lot about by region and with the dot.com about (indiscernible) revenue expectations for Q2 through Q4 are high. I guess can you talk a little bit about what your overall expectations are for revenue for Q2 through Q4, I mean even just directionally if you don't want to go to numbers, I mean it sounds like you expect those numbers to be higher, is that right?

David Kirchhoff - President and CEO: Are you talking about Weight Watchers online?

Chris Ferrara - Bank of America: I am talking about the entire base. I mean it kind of like NACO rest of the year looks better, CE – I mean U.K looks better and online, but just overall for the whole company, does it all look better Q2 through Q4?

David Kirchhoff - President and CEO: I think by definition with the guidance being higher, (we may not) be seeing some of that tapping on the top line. I think what's fueling – if you think about it, when you have a great Q1 as we did, that certainly gave us $0.10 versus maybe what expectation was for the Q1, but really that recruitment drive delivers value throughout the course of the year in terms of top line and then bottom line growth. So, I think we are – from Q1, recruitment trends are well, that by itself is going to drive top line and Ann, I don't know if you want to add something to that?

Ann M. Sardini - CFO: Yes, I was just going to say, the guidance that we gave last time, which is 15% to 20% on a full year revenue growth, I think now you can kind of think about it at the high end of that range.

Chris Ferrara - Bank of America: That helps and also I guess on SG&A, I mean given the incremental investment you guys have talked about, I mean SG&A I think you said for the full year was going to be down as a percentage of sales but not all that much slightly and I think you said ads would be or marketing would flat year-on-year. Given that you are thinking revenues are going to be higher right, but spending is going to be higher. Do those two data points hold for year?

David Kirchhoff - President and CEO: I think if you look at marketing – I'll give you good examples – we've been able to be opportunistic. So, for example, we found out that Jennifer was going to be featured on the Grammies and then she was going to be part of the opening act do only the recent Franklin respect song and was going to be getting a visibility, so we jumped at the opportunity therefore to invest some advertising at the Grammies. So as we see these types of opportunities, we take them and we're trying to and we're continuing to be very aggressive of pursuing them with the understanding and belief that they are going to be concurrently driving enrollments. And so as we see opportunities like that, we'll take them and so for that reason, it's reasonable to expect marketing that stay fairly consistent as a percentage of revenue over the course of the year. In some cases, I can't even roll up the possibility if we saw great opportunity in fall, we might jump at that to bring in some additional volume into the business, even knowing that the revenue that we get from someone we bring in fall is mostly going to be in the following where we'll be recognizing all the expense associated with fall. But as we get into those types of decisions, we'll certainly share that with you guys on calls similar to what we shared with (men) because that really have the same kind of affect. In terms of G&A, as we referenced on previous calls and you heard a little bit of today, the places where we're really investing in the business, again it really comes down to technology. There is not a single growth opportunity that we have that doesn't have a meaningful technology component to it, either in terms of application development or supporting systems. And so, we're looking for opportunities to increase the pace of technology investment. Certainly, the retail rollout has some impact not as much on an EPS perspective, because as Ann has pointed out, the overall rent footprint, if you will, is fairly consistent, because we're getting better terms as well as having more optimized meeting network, but we are increasing CapEx associated with those centers. The healthcare opportunity, we're going to have to invest in front of, in terms of bringing in kind of a new team of people, they can allow us to build that opportunity out and so some of the incremental G&A is going to come in the form of bodies are going to be hugely productive for us going forward in the '12 and '13. So, those are the types of places where we're making those investments, but I think still sort of the previous guidance with them providing is.

Ann M. Sardini - CFO: Always mindful of not growing the core base of G&A, but always looking in terms of how to, if there's any increase G&A towards growth in future.

Operator: This will conclude the question-and-answer session. I would like to turn the meeting back over to Mr. Kirchhoff.

David Kirchhoff - President and CEO: Thank you for joining us today, and I look forward to speaking with you again at our next quarterly earnings release.

Operator: Thank you. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.