Welcome to Weight Watchers International Fourth Quarter and Full Year 2012 Earnings Teleconference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, Wednesday, February 13, 2013. I would now like to turn the call over to Lori Scherwin of Weight Watchers International. Please go ahead.

Thank you, operator, and thank you to everyone for joining us today for Weight Watchers International Fourth Quarter 2012 Conference Call. With us on the call is David Kirchhoff, Chief Executive Officer; and Nick Hotchkin, Chief Financial Officer. At about 4:00 p.m. Eastern Time today, the company issued a press release reporting the fourth quarter and full year financial results of fiscal 2012. 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 SEC. Please refer to these filings for a more detailed discussion of forward-looking statements and the 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 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 Dave. Please go ahead.

Good afternoon and thank you for joining us as we review Weight Watchers International's performance for the fourth quarter of fiscal 2012. Overall, our fourth quarter results exceeded our incoming expectations. While Nick will provide more details on our Q4 results, at a high level, Q4 2012 EPS was $1.03 on an as-reported basis and $0.96, excluding a $0.07 benefit from the U.K. tax settlement that Nick will discuss later. This compares favorably with an EPS of $0.86 in Q4 2011. On a constant currency basis, Q4 2012 total revenues was up 1.7% over the prior-year period, with meeting fees down 3.5%, in-meeting product sales flat and Internet revenue up 18%. Global combined paid weeks were up 4.5% in Q4 2012 versus the same period last year. Global meetings paid weeks were down 7.9% in Q4, while global paid weeks for our online product were up 18%. Before Nick reviews our financial results in greater detail, I'd like to provide perspective on early trends we're seeing in 2013. In early December of 2012, we launched our new program named Weight Watchers 360 in North America, with different names in other regions. The design principle of this new program was to build upon the PointsPlus program, which was rooted in tracking, by incorporating additional tools and support that encourage our members to create healthier food environments and to help them focus on habitualizing the underlying behaviors of the healthy lifestyle. This methodology was designed to help our members not just lose their weight but also to develop the skills necessary to maintain their weight loss. The program was designed to further improve member results and provide further differentiation of our underlying program. Early feedback from staff and members was encouraging. While we did see some improvement in recruitment trends when we…

Thanks, Dave, and good afternoon, everyone. As Dave referenced, in the fourth quarter, we realized a $0.07 of EPS benefit from the settlement of our U.K. tax litigation. Recall that between 2009 and 2011, we had recorded a reserve of approximately $44 million but we ultimately settled for about $36 million. All of my subsequent remarks today will exclude this benefit from P&L comparisons. Now onto fourth quarter business performance, starting with weightwatchers.com. Fourth quarter Internet revenues rose 18% on a constant currency basis. Paid weeks also grew 18% in Q4, with double-digit growth in both the U.S. and international. Germany and Canada continued standout performance on the heels of first-time TV marketing. Sign-up growth was positive in the U.S., Canada and Continental Europe, offset by flattish performance in the U.K. End-of-period active subscribers were also up 18% as compared with end of year 2011. This is somewhat better than our earlier expectations, with a late quarter pickup in sign-ups in the U.S. and robust growth in Continental Europe. And after several quarters of softness, U.K. sign-up trends began to stabilize. Within the meetings business, total NACO revenue in the fourth quarter 2012 was down 2% versus the same period in fiscal 2011. This represents moderation versus the declines witnessed in the first 9 months of the year. NACO fourth quarter 2012 paid weeks declined 7.3%, while attendance declined 14.5% versus the prior-year period. We continue to estimate that Hurricane Sandy had an approximately 2% impact on NACO volumes. In-meeting product sales grew 6.1% versus Q4 2011, as an increase in product sales per attendee offset lower attendance. Next, the U.K. meetings business. The business continued to witness volume and revenue declines versus prior, and that accelerating rates in Q4 as compared to the first 9 months of 2012. Fourth…

Thanks, Nick. We see an incredible world of opportunity for Weight Watchers, but we're far from satisfied with our near-term results. We know that the process of getting people to proactively step forward and make a fundamental change in their lives is not easy. Lifestyle change and sustainable weight loss take work and commitment. Weight Watchers prides itself on doing right by our members by giving them the tools they need to truly tackle difficult problems and not to promise overnight instant success. Inherent to our category is the reality that consumers often make decisions on hope, so the challenges of the latest quick-fix are always difficult. This is compounded by the fact that our category is also directly impacted by consumer discretionary spend, which has been unfavorable over the past few years. In the short term, we're actively working to adapt our marketing to the reality of our current competitive context. Much of the work in the past 5 years has greatly improved the underlying strength of our brand. Today, we're a much more visible brand with greatly improved image of modernity. This isn't hope on our part but rather based on measured brand scores. According to our tracking study, growing percentages of consumers describe Weight Watchers as "for people like me" and as "a plan that fits my lifestyle" as well as "more modern." We now have a program that is even better suited to longer-term behavior change in ways that are completely unmatched. We believe passionately in our mission and the role for us to play in fighting the obesity epidemic. We see the success of our members every day, and we know that there are many, many more tools that we can bring to bear to help consumers deal with this difficult problem. We can and…

[Operator Instructions]

And before we start questions, if I could just make 1 point. I misspoke. On our assumption for revenue for the year, we're assuming low-single-digit revenue declines, not double-digit revenue declines. Thank you for that. Sorry.

[Operator Instructions] Our first question comes from Bob Craig of Stifel. Robert L. Craig - Stifel, Nicolaus & Co., Inc., Research Division: David, just broadly speaking, it sounded to me like what we're going to see from Weight Watchers going forward is perhaps a greater strategic emphasis on the online side versus the meetings business? Is that an accurate assessment of what you've been saying?

No. That's not the way I would characterize it. What's interesting, Bob, is that historically, up to now, we've been able to operate effectively with 2 offerings: Monthly Pass and Weight Watchers Online. In both, we've been able to add value to both, Monthly Pass, particularly through retention, increasing retention in meetings business. And Weight Watchers Online has given us an effective way of bringing in more people into the commercial dieting space. But what's really been happening particularly over the past year is that there, this notion of dieting online is really taking hold and people are now using not just Weight Watchers but pursuing a variety of other approaches, albeit one that, I believe, are generally going to be less effective for them. I think what we see going forward is an opportunity to sort of break free of the historic approach of being purely focused on having a purely online offering and a purely meetings offering that includes an online component and doing variations of the above that make differing advantages of the components we have in face-to-face interaction, our underlying science and everything else, to conceive of entirely kind of new versions, if you will, of Weight Watchers that build upon what we do, that allow us to kind of spread our offering out to appeal to a wider range of consumers. I think one thing that's -- a really important point to make, and this was seen in a recent independent academic study in the Journal of Internal Medicine but it's also borne out by a lot of our internal research, is that when you look at what actually drives efficacy in terms of successful outcomes, what we see is that the things such as apps in online and Internet offerings really reach their full potential when combined with human face-to-face interaction. And it's really the combining of all of these elements that you have the greatest outcomes in terms of weight loss success. And we believe that over time, that this is the most critical thing for us to focus on. So I continue to actually believe more and more that face-to-face elements are going to be an even in some respect bigger part of kind of who we are. I just think it's going to take evidence potentially in forms above and beyond the traditional group support. Robert L. Craig - Stifel, Nicolaus & Co., Inc., Research Division: That's helpful. Second question is what are your thoughts, David, on trying to enhance affordability in this kind of environment? I know that obviously you had price increases that you've taken over the last 18 months. I don't know whether that's -- been a detrimental -- had a detrimental impact on attendance. But any thoughts on increasing promotional activity or potentially even using some temporary price rollbacks?

Here's kind of the way I look at price, which is obviously in the context of value. When I think about value, the good news, if you will, for us across both Weight Watchers Online as well as with meetings is that the recruitment issues we're facing is not from rejoins. In fact, if I look at the U.S. online business, which is -- had kind of the toughest time of all our online markets, Weight Watchers rejoin activity, if you will, returning subscribers was up nicely over prior year, as well. Retention has really held up very nicely over the course of the past number of years including the worst of the Great Recession. And then finally, if I look at scores that our members and subscribers give us in terms of perceived value, they remain as high as they've ever been. So what that tells me is that once we get people going into the program, we don't have an issue from a value recognition point of view. Now I do think that a challenge that we're facing right now is clearly therefore on trial, driving trial into Weight Watchers, particularly for people who have never used us before. And given the context of difficult economic circumstances and the fact that there's these things like free apps and those types of things, I think it's putting additional pressure on us to think of new and better ways to convey our message and market our message and communicate our value proposition. But I wouldn't rule out the possibility that there are ways of us thinking about better and more effective ways to promote the product that could also stimulate trial. Robert L. Craig - Stifel, Nicolaus & Co., Inc., Research Division: Okay. Last one for me and I'll it over. Where are you versus where you think you need to be in terms of internal infrastructure to be able to grow the B2B business, the large corporate business?

We've made great progress in the past year. And that team is really coming together nicely. We made a couple of great hires. We're continuing to build out the technology infrastructure. That's probably the hardest part of this, is really making sure that we have the data collection and capture capability to service the needs of some of these large accounts. It's our expectation that -- so what we're doing with that is we're in the process of rolling out laptop computers in sort of what we call travel locations, including locations on the work site. Our plan is right now, this year, to roll out about 500 of those, which, among other things, would allow us to cover the top 25 strategic accounts -- or 25 of the top strategic accounts by the end of the year and that's really a learning platform that we can then take into the next year. And at the same time, even in the context of managing costs in G&A much more closely, we're making sure that we properly cordon off certain investment areas to make sure that they're getting the adequate oxygen they need to continue building out so we can capture this opportunity. I'll continue to make the point that on the health care side of the opportunity set, the more time we spend talking to people, ranging from employers to health systems to insurance companies and everything else, the more we see that there's a tremendous pent-up need, that as the health care world shifts from pay per -- fee-for-service to population health or capitated models, then that is going to drive demand for preventive care services. And in that market, if you look at our 80-plus clinical studies, the fact that we're low-cost and the fact that we have a fully scaled up solution puts us in a position to have significant differentiation from many other obesity treatment out there. I think it's absolutely crucial that we keep pace on making sure that we're continuing to build out what we have to do for that opportunity set so we can grow into that while at the same time reenergizing our B2C business.

Our next question comes from Glen Santangelo from Credit Suisse. Glen J. Santangelo - Crédit Suisse AG, Research Division: David, I'm just kind of curious. Based on the trends that you've seen now through the first 6 weeks of the year, could you -- it sounds like you're forecasting paid weeks in attendance on average between NACO and international down kind of low-double-digits, and so I'm curious if you could speak maybe to the conservatism of your new outlook, particularly on the context that it sounds like you're going to be trimming your marketing expectations from your -- or your marketing dollars from your original expectations. And I'm kind of curious as to, given that you're disappointed with the enrollment to date, I mean, does it make sense to trim those marketing expenses at this point in time?

Yes, I should probably clarify that a little bit. So first off, in terms of our expectation, I mean, it's always, obviously, a tricky time of year for us to forecast the full year because we're literally -- if I kind of look at where the business has been over the past 2 or 3 months, volume trends, both online and meetings, as you heard Nick talk about, all the way through December are actually looking pretty good. And the first week of January was actually quite good, particularly for the U.S. online business. So that looks so -- things were looking up. And it really wasn't until the second, third week of January that we saw a significant drop. And what we have effectively done in building our forecast is we've assumed that, that depressed level of volume that we've seen in weeks 2 through 5 of the year so far, 2 through 6 really, is going to be persistent over the course -- the full course of the year. So that's effectively the methodology that the forecast is built on. Whether that's conservative or not, I mean, I hope you're right. But we felt that, that was a better way to forecast the volume of the business. Now the marketing point is a little bit of a different point. We're not actually reducing marketing beyond what we were planning on doing when we entered the new year. So nothing is happening in the marketing budget that's in response to the current conditions. The 2 things that are changing in the marketing, principally speaking, 1 is we did make the decision to take 1 year off of our men's awareness driving campaign, mostly because the cost for acquisition we were seeing, particularly in the spring and fall, were not…

We do, for the following reasons. Fundamentally, the thing that I take the most heart in is that after years of having people actively subscribing to and paying for Weight Watchers Online, they see tremendous value in it and they have great success on it, which is the thing that ultimately matters. And again, we've seen this in satisfaction studies we do multiple times per year, every year. We see this in the fact that actually -- one way of thinking about this is that if there was an issue with the value proposition for Weight Watchers Online, we wouldn't be seeing repeat activity, because those people would naturally sort of be gravitating towards other options, presumably things like free apps. But that's not actually the phenomena we're seeing. People are absolutely coming back to us. And furthermore, we haven't seen any loss in retention. So I mean, that's what leads us to the point of view that the value proposition remains strong. I think what you're seeing happen is that -- and we've seen this kind of anecdotally, including industry references across a wide range of a lot of these self-tracking help apps, is that there's a tendency for people to download them onto their device, and in many or most cases use them a few times and then stop using them. The impact of that on us, short term, is that, that effectively takes that person out of the mix. Now the fact that they ultimately haven't lost weight means that they're still going to have a weight problem, in that, they're still going to come back to us. And I think the thing that I want to keep emphasizing is that when you talk to a Weight Watchers Online subscriber and say what is it that you're…

Glen, if I could just add 1 more thing to this marketing conversation. We looked at our guidance for '13, actually view it on the context of what '12 was, we spent $344 million of marketing in 2012 and a high watermark of 18.8% of sales. And so that's why partly, why we think there's opportunity to look for pragmatic sensible efficiencies without of course doing anything to choke off recruitments.

Our next question comes from Brian Wang of Barclays.

The first question I have is sort of a follow-up on some of the other questions that have already been asked. But I guess do you think 1 of the issues in the year-to-date trend is that the new Weight Watchers 360 program wasn't a big enough change or upgrade? And is there any way to know that the year-to-date weakness is being caused by the weak advertising methods rather than other country-specific issues such as potential in the program?

Yes. It's a great question. And I think one way to think about what we call program innovation or new programs is that there are some changes that we make which are designed to improve the process and be more effective once somebody has already started. And there are others that are designed to make Weight Watchers feel more acceptable and more appealing. So I'll give you a couple of obvious examples of the latter, which is when we launched points and moved away from food exchanges, it greatly expanded our potential audience by creating a virtual Weight Watchers that was very simple and sort of much more accessible to people that were living on the go. When we launched Weight Watchers Online, which is an innovation in it's own right, it basically gave people a way of doing Weight Watchers but allowed them to have the option of doing it online, and that brought a lot of new people into the brand. PointsPlus, similarly, was very kind of catchy in that there was these sort of pre-approved, new formula, more nutrition-based, more nutritious, that was very -- it leant itself to word-of-mouth and it was a good trial vehicle. I think what we learned with Weight Watchers 360 is that we were very focused and almost single-minded in our design of improving the behavior change techniques for people once they started. And our assumption was that if we were really good at doing that, that we could somehow find a way to like come up with a catchy way of marketing it so that people would sort of get it. I think what you'll see with Weight Watchers 360 and what we've seen from our tracking studies is that people definitely know that Weight Watchers has a new program,…

And that sort of leads me to the second question I had. I think you mentioned that you were going to do a new marketing message for the spring? Is that sort of a major revamp? Because I guess last year when U.K. your marketing message missed you needed to wait, I don't think it was 1 full year, but you basically waited about 1 year due to lead times on those campaigns. So if you could just talk a little bit about that, please?

Yes. That's a good point. One of the tricks with the spring is that we also -- because it's just one of those years where things are just happening in a particular way. This was a year with a very early Easter. In fact I think it's the earliest Easter can be. Don't ask me to explain the Gregorian calendar dynamics of how that works. But it's an early Easter, which means we don't have a lot of time between now and when we get our advertising spots out for the spring campaign. What that effectively means is that we can do some changes and tweaks to the advertising, but any place where we feel like our strategy, our underlying strategy, might not be quite right, so, for example, I talked about Weight Watchers Online, means it really limits our ability to do a complete revamp. So what we can do is we can punch certain points a little bit harder, we can change a couple messages up, but it doesn't afford us time to do a complete sort of relaunch, if you will, and come up with an entirely new advertising campaign, but we can do some things on the margin. So I want to kind of temper expectations, which is one of the reasons why we have assumed that the volume trends we're seeing now persist throughout the year. I want to temper expectations of how far we can get in spring but recognize that we're going to be doing kind of a big reevaluation of the strategy that would put us in a better position potentially in fall and certainly by next winter campaign.

Okay. And then just one last one. This one's probably for Nick. Can you please discuss the debt covenants? I guess it's the -- guidance came in at the low end of the range, whether that would sort of trip up any of the debt covenant. Is there any issues there?

Yes, good question. And as you can imagine, as a ex-corporate treasurer who lived through the global financial crisis, covenants and the capital structure is something I look at closely. We've got real strong cash flow. I'm comfortable with our covenants. And the debt market is hard, always open to ways to optimize our capital structure, but no plans at this time and we're very comfortable with our covenants.

Even at the low end, do you think it's fine?

Yes. Look at -- you can do the same math. I can do it but -- yes, I mean, we're basically -- I'm comfortable with our covenants situation.

Our next question comes from Peter Wahlstrom of Morningstar Investment.

Circling back to the online topic, are you seeing more competition primarily in the U.S., or is this a global issue where it's equally prevalent in the U.K. and Continental Europe?

It's a great question. We actually see proliferation of applications across the global market. To the extent that it's had impact, the impact seems to be strongest in the U.S. Now I think, one of the things that's worth pointing out is that just in general, the shift of consumer usage around smartphones and tablets is obviously taking lots of organizations by surprise. I'm not -- I think the rates of adoption have been fairly consistent across most of the Western economies. So again, what is worth noting is that the online business in Europe is running ahead of prior after comping a good year. So I think that's a positive sign, despite the fact they also have some pre-app competition. It may not be quite as intense as what we're seeing in the U.S. where it can, basically, the U.S. app environment can support a lot more players than a country with a smaller population. But I also think that it is worth noting that there's other things at play. I mean, the macro impact of what's going on with the U.S. economy, again it obviously didn't do us any favors, particularly in the context that I just described, the competitive context, with the payroll tax going through the beginning of January could not have been worse timing from our perspective. So I think you do have a couple of factors that were sort of working together in an unfortunate way. Again, I view these as opportunities. I don't have any doubt that I've got a better mousetrap with Weight Watchers Online, in terms of helping people systematically deal with the weight issue, than they can get from any 1 singular app. I think the challenge is for us is to use this as an opportunity and a catalyst to be that much more aggressive.

Fair Point. And maybe that ties into -- one of the previous questions was asked about revisiting the pricing model or using promotions. And I guess based on your response, that even though Weight Watchers is set to become more aggressive in the online space, you don't view this as the company is having to make a structural change to a pricing model. Maybe it's a tiered service or something along the lines of all options on the table? Is that fair to say?

I mean, I think there's a lot of options on the table. But I think one of the options that I'm not contemplating is changing the fact that Weight Watchers Online, even at current price point of $18.95 a month, is a great value for the customers that are using it based on what they tell us. I think that the point I was making earlier is that if our challenge is driving trial, and that is our challenge right now, there's -- I think it's a very fair question to say are there -- in addition to having a different marketing strategy/message, are there other things we can think about in terms of promotional strategies that might be more beneficial to driving trial in a competitive context? And I think that is absolutely on the table.

Okay. And taking a step back, when you mentioned that you're seeing success with returning members and retention in contrast to the never-members and maybe some of the online pressures, are you seeing a subtle demographic shift, maybe where you're missing out on a younger individual or a particular income segment of the population?

Not really, although let me take a step back and say we only have, again, 5 or 6 weeks of data for January. So we're not that deep on demographic trends. I would be surprised, but that's 1 of the analyses that we'll be taking a look at. If there was an income effect, the obvious hypothesis would be those people at the lower end of the income spectrum are the ones that are seeing the biggest hit on disposable spending as a result of the payroll tax, because that effectively was a regressive tax increase. And so if there was going to be a place where I thought that was going to have particular impact on it -- on us, I would say it would be for households earning $60,000 to $70,000 or less. But again, I think it's going to be a little while until we have a read on that.

Okay, fair enough. And one last item. In December, Vivus announced better-than-expected prescription growth from its Qsymia product. I'd asked about that a couple quarters ago, but wondering if you're seeing that as having a material impact on either a detractor for new signups or maybe the way that people perceive Weight Watchers?

As I understand it, and I had a chance to listen to the Vivus presentation when I was out at San Francisco at the health care conference, I think they're -- you have to put their trial numbers in the context of what they were expecting and where they are in the distribution strategy. I think if you looked at the sheer number of people getting prescriptions on -- for their weight loss drug, in terms of just absolute numbers, it's pretty tiny right now. So I think what you're hearing from them is more how it compares versus our expectation on a slow rollout. I'll make the point that even in places where Qsymia is getting coverage, as I understand it, you're still looking at a co-pay of $40 or $50 a month. So I think -- and that's where there's coverage. So I think, look, we take every competitive threat, as you've already heard, we take every competitive threat seriously. The other -- I would say though that with these medications that consumers are going to have to pay significant out-of-pocket for them under virtually all circumstances, and certainly compared to the price of Weight Watchers. I'll also continue to make the point that those -- that all of these obesity medications approved or to be approved were predicated as an adjunct to a behavior change effort as opposed to a replacement to a behavior change effort. And so, like a lot of things, we think that this does -- if all these things drive greater interest around behavior change, the question is how do we leverage that increased interest?

Next question comes from Dara Mohsenian of Morgan Stanley.

Dave, I just want to take a step back and get more of a long-term view around the meeting business. Historically, organic attendance in North America has been declining pretty consistently over the last decade except for a couple of years. And obviously, it looks weak again in 2013. And it seems like that goes beyond just the ineffective marketing message you cited. I just want to get your perspective on what the big issues are holding you back on the meeting business, and as you think about the business going forward, are there game changers in terms of how you manage the business that can help reinvigorate growth?

Yes, I think there's a -- I would characterize it the following way. I mean, I would think that, to your point, I would say that when we have the right combination of marketing and program news we're able to drive some pretty nice growth in terms of enrollment activity around the meetings business, specifically I'm talking about 2011. Frankly, even if I looked at recruitment trends in the beginning of 2000 -- at the first half of 2012 for NACO meetings, those enrollment numbers were at or nicely ahead of 2009 and '10, they just had a tough comp. It really was toward the back half of the year that we saw increasing pressure from enrollment activity, and that's obviously continued into this January in the meetings side of the business. I think, from a longer-term perspective, I see a couple of things. First off, I do see a world of Weight Watchers in which there is more in the offering than just online and meetings. So I think that you could see various ways of us leveraging our face-to-face capabilities going forward. I think the reality is, is that every study that comes out again shows that the thing that is most predictive of weight loss outcomes and efficacy are often things that surround -- are surrounded by group support. It works from a behavior change point of view on a multitude of dimensions. And unlike traditional retailers being disintermediated by online options like Amazon and things like that, there's no alternative out there that delivers weight loss outcomes like the combination of group support combined with Internet and apps. So my underlying presumption is that when you have something that does a better job of driving weight-loss success, that there are ultimately ways of driving it. So…

Okay. And then it clearly sounds like you're focused SG&A efficiencies going forward. Can you discuss what the key areas you're looking at are in terms of potential cost cutting, and if we can expect a more broad restructuring program at some point or if you're focused more on belt tightening?

No, I think it's -- I would kind of put it into 2 or 3 big buckets of activity. I think first off, as we become larger as an organization, we have an increase in cost, but with that also comes an increase in organizational complexity. And I think it's mostly been a function of trying to do a lot of different things at the same time because we have lots and lots of opportunities in different places. I think 1 of the important opportunities we now see in the context of all of this is really tightening up our focus on the bets that we're making and making sure that we resource behind those bets and de-prioritize things that might have been nice to do but frankly aren't as important to our long-term future. And what that allows us to do is, therefore, tighten up organizational focus, and that allows us to reduce cost at the same time. I'll give you a really clean example of this, is that we literally have doubled the amount of money we spent on professional services over the past 3 years, and I'm talking tens of millions of dollars. And I'm not sure that we're getting the return on investment from that incremental spend as I kind of look back at it. So that's an example where I think we can significantly tighten up. We also have to prioritize to get there. So that's kind of the first bucket. The second bucket is that I think we have an opportunity to look at how we're structured as an organization, organizationally, and are there different ways of configuring ourselves that allow us to be both more agile and better at execution, and at the same time do things more efficiently with less cost? Then finally, I think there's always an opportunity, as 1 of my boardroom members refers to it as mowing the grass, which you can use to basically -- if you want to call it belt tightening, which is just taking a fresh look through the entire cost structure and cutting out those activities, leaning harder on vendors, those types of things. But the combination of all those things both reduces cost but also increases organizational effectiveness at the same time. And it's -- our view is not one or the other but both.

Okay. And then on the B2B spending increase in 2013, are you leaving 2013 in more of a sustainable type of spending base? Or should we expect still substantial spending increases on the infrastructure for B2B over time beyond 2013?

I think you can expect the areas of -- and a lot of this obviously is already built into our guidance. It's all, frankly, built into our guidance. But the places where we're increasing spending is, to a certain extent, people, although we now have a nice sort of core B2B team that's currently in place. But frankly, a lot more of where the money is coming from is the process of creating data collection capabilities in our meetings. That's probably the biggest area of spend. And at some point, we reach steady state on that. And I think once we have the data collection capability, the nice thing is that it's a platform that can actually serve a lot of ends: 1, enabling our health care opportunity; but 2, as we're getting real-time data on members as they're coming to us, I think it also creates some opportunities to certain point, tools around customer fragility and these types of things would give us opportunity to increase retention. So we think that the ROI for that activity is going to be very, very strong, we just want to make sure we execute it the right way. In terms of providing kind of a forward look beyond 2013 of the spend behind some of these, we're going to have a little bit more to share. Again, we were hoping to have the investor meeting, the investor conference in the first half, for all the reasons that are probably apparent right now, we need the team focused on the things they focus on right now. But we'll be in a position towards the second half to provide a lot more clarity for what that investment level as well as our expected return against it looks like in '14, '15 and '16.

Our next question comes from Olivia Tong of Bank of America Merrill Lynch.

Why do you think the recruitment trend started off well but then -- in both the meetings and online, and then decelerated quickly after that?

It's a good question. I think the most obvious thing is that when we have the soft launch, we did get some buzz from that. And I think that helped drive recruitment levels a little bit. I do think that there's also this interesting effect in January. If I had to hypothesize it, we're still kind of sifting through the data, but if I had to hypothesize, there are 2 things that were -- that changed in December. One was the macroeconomic. So this is when the payroll tax holiday went through. And I think there have been reports that a number of retailers have been sort of feeling the effect of this in January, but that's purely a January phenomena. Really the impact that people were seeing on their paychecks was happening in the second and third week. I think that explains part of it. I think, frankly -- and yes, January is the time when everybody is trying whatever the new thing is. And so you might generally see increasing pickup of whatever fad or quick fix approach it might be, and so that potentially wasn't doing us any favors. But frankly, most significantly, I think the fact that the messaging around the program and the advertising supporting it not hitting expectations, really you're going to see the effect of that mostly as you get into, like, weeks to and beyond January. And I think that's exactly what we're seeing. So we're just -- we're not getting the lift from our marketing that we would otherwise have gotten had things gone differently in terms of both the program having a connecting hook with the never-member as well as the impact of the advertising.

Got it. And then in terms of your guidance, you guys said that you've obviously got a pretty big range there, and you typically start the year with a pretty big range. But can you give a little bit more color in terms of what your expectations are on the bottom end versus the top end in terms of recruitment and then also on the cost saves, relatively speaking?

Yes, look, on the lower end of our guidance, essentially that the trends that we're seeing right now in recruitment have set throughout the year, duration of the year on the high end of the guidance. It incorporates the benefits of our lower prioritization and lower cost reduction activities that Dave's described, and that we kicked off last week with the team.

Last question that we have for today. I would like to turn the meeting back over to Mr. Kirchhoff.

Thanks. In summary, while the near term is challenging, we have experienced similar challenges in the past and have overcome them each time, and we will do so again this time. I look forward to speaking with you again at our next quarterly earnings release. Thanks very much.

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