Nutrisystem 2009 Annual Report Download - page 58

payments and unused lines fees are classified as interest income, net in the accompanying consolidated
statements of operations.
The Credit Facility contains financial and other covenants, including a maximum leverage ratio and minimum
interest coverage ratio, and includes limitations on, among other things, liens, certain acquisitions, consolidations
and sales of assets. The Company may declare and pay cash dividends up to specified amounts if certain ratios
are maintained and no events of default have occurred. As of December 31, 2009, the Company was in
compliance with all covenants contained in the Credit Facility.
At December 31, 2009, the Company had $448 of unamortized debt issuance costs associated with the Credit
Facility that are being amortized over the remaining term of the Credit Facility. The amount of unused Credit
Facility at December 31, 2009 was $200,000. The Credit Facility can be drawn upon through October 2, 2012, at
which time all amounts must be repaid.
8. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases its warehouse, corporate headquarters and certain equipment. These leases generally have
initial terms of one to 12 years and have renewal options for additional periods. Certain of the leases also contain
escalation clauses based upon increases in costs related to the properties. Lease obligations, with initial or
remaining terms of one or more years, consist of the following at December 31, 2009:
2010 ..................................................................... $ 2,072
2011 ..................................................................... 2,301
2012 ..................................................................... 2,957
2013 ..................................................................... 3,012
2014 ..................................................................... 3,067
Thereafter ................................................................. 23,339
$36,748
Total rent expense for 2009, 2008 and 2007 was $3,269, $2,732 and $2,334, respectively.
Litigation
Commencing on October 9, 2007, several putative class actions were filed in the United States District Court for
the Eastern District of Pennsylvania naming Nutrisystem, Inc. and certain of its officers and directors as
defendants and alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The
complaints purported to bring claims on behalf of a class of persons who purchased the Company’s common
stock between February 14, 2007 and October 3, 2007 or October 4, 2007. The complaints alleged that the
defendants issued various materially false and misleading statements relating to the Company’s projected
performance that had the effect of artificially inflating the market price of its securities. These actions were
consolidated in December 2007 under docket number 07-4215. On January 3, 2008, the Court appointed lead
plaintiffs and lead counsel pursuant to the requirements of the Private Securities Litigation Reform Act of 1995,
and a consolidated amended complaint was filed on March 7, 2008. The consolidated amended complaint raises
the same claims but alleges a class period of February 14, 2007 through February 19, 2008. The defendants filed
a motion to dismiss on May 6, 2008. The motion has been fully briefed, and oral argument was held on
November 24, 2008. On August 31, 2009, the Court granted defendants’ motion to dismiss. On September 29,
2009, plaintiff filed a notice of appeal, and the dismissal is currently on appeal. The Company believes the claims
are without merit and intends to defend the litigation vigorously.
Commencing on October 30, 2007, two shareholder derivative suits were filed in the United States District Court
for the Eastern District of Pennsylvania. These suits, which were nominally brought on behalf of Nutrisystem,
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