Nutrisystem 2006 Annual Report Download - page 17

•
failures to
p
rovide our customers with their s
p
ecific food selections;
•i
na
d
equate num
b
ers o
f
te
l
ep
h
one counse
l
ors, customer serv
i
ce representat
i
ves an
d
ot
h
er personne
l
;an
d
•
an
i
na
bili
t
y
to route a
ll
ca
ll
s
d
ur
i
n
g
sp
ik
es to t
h
e appropr
i
ate personne
l.
If
we
f
a
il
to a
d
apt our management,
i
n
f
ormat
i
on systems an
dfi
nanc
i
a
l
contro
l
s to our growt
h
,or
if
w
e
encounter ot
h
er unexpecte
d diffi
cu
l
t
i
es, our
b
us
i
ness,
fi
nanc
i
a
l
con
di
t
i
on an
d
operat
i
n
g
resu
l
ts w
ill
su
ff
er.
W
e rel
y
on th
i
rd
p
art
i
es to
p
rov
i
de us w
i
th ade
q
uate
f
ood su
pp
l
y
and certa
i
n
f
ul
fi
llment,
i
nternet,
networking and call center services, the loss of any of which could cause our revenue, earnings or
r
eputation to suffer.
F
oo
d
Manufacturer
s
.
We re
ly
so
l
e
ly
on t
hi
r
d
-part
y
manu
f
acturers to supp
ly
a
ll
o
f
t
h
e
f
oo
d
an
d
ot
h
er
products we sell, the top four of which supplied approximatel
y
6
5
% of our food in 2006. We currentl
y
have
wr
i
tten contracts w
i
t
h
on
l
y two o
f
t
h
ese manu
f
acturers an
d
t
h
ere
f
ore are not assure
d
o
f
an a
d
equate supp
l
yor
pr
i
c
i
n
g
on a
l
on
g
-term
b
as
i
s. I
f
we are una
bl
etoo
b
ta
i
nsu
ffi
c
i
ent quant
i
t
y
, qua
li
t
y
an
d
var
i
et
y
o
ff
oo
d
an
d
ot
h
e
r
products in a timel
y
and low cost manner from our manufacturers, we will be unable to fulfill our customers
’
o
r
d
ers
i
nat
i
me
l
y manner, w
hi
c
h
may cause us to
l
ose revenue an
d
mar
k
et s
h
are or
i
ncur
hi
g
h
er costs, as we
ll
as
d
ama
g
et
h
eva
l
ue o
f
t
h
e Nutr
i
S
y
stem
b
ran
d
.
F
u
lf
i
ll
ment
.
Approx
i
mate
l
y 87% o
f
our or
d
er
f
u
lfill
ment
i
s
h
an
dl
e
db
yat
hi
r
d
party, Oz
b
urn-Hesse
y
Lo
gi
st
i
cs, or OHL. S
h
ou
ld
OHL
b
e una
bl
e to serv
i
ce our nee
d
s
f
or even a s
h
ort
d
urat
i
on, our revenue an
d
business could be harmed. Additionall
y
, the cost and time associated with replacin
g
OHL on short notice woul
d
add
to our costs. Any rep
l
acement
f
u
lfill
ment prov
id
er wou
ld
a
l
so requ
i
re startup t
i
me, w
hi
c
h
cou
ld
cause us to
l
ose sa
l
es an
d
mar
k
et s
h
are
.
Internet, Networ
k
in
g
an
d
Ca
ll
Center
s
.
Our
b
us
i
ness a
l
so
d
epen
d
s on a num
b
er o
f
t
hi
r
d
part
i
es
f
or
i
nternet
a
ccess, networ
ki
n
g
an
d
ca
ll
center serv
i
ces, an
d
we
h
ave
li
m
i
te
d
contro
l
over t
h
ese t
hi
r
d
part
i
es. S
h
ou
ld
our
network connections
g
o down, our abilit
y
to fulfill orders would be dela
y
ed. Further, if our website or cal
l
centers
b
ecome unava
il
a
bl
e
f
or a not
i
cea
bl
e per
i
o
d
o
f
t
i
me
d
ue to
i
nternet or commun
i
cat
i
on
f
a
il
ures, ou
r
b
us
i
ness cou
ld b
ea
d
verse
ly
a
ff
ecte
d
,
i
nc
l
u
di
n
gh
arm to our
b
ran
d
an
dl
oss o
f
sa
l
es
.
Th
ere
f
ore, we are
d
epen
d
ent on ma
i
nta
i
n
i
ng goo
d
re
l
at
i
ons
hi
ps w
i
t
h
t
h
ese t
hi
r
d
part
i
es. T
h
e serv
i
ces we
requ
i
re
f
rom t
h
ese part
i
es ma
yb
e
di
srupte
dby
a num
b
er o
ff
actors assoc
i
ate
d
w
i
t
h
t
h
e
i
r
b
us
i
nesses,
i
nc
l
u
di
n
g
t
he
f
ollowin
g:
•
labor disru
p
tions
;
•d
e
li
very pro
bl
ems;
•fi
nanc
i
a
l
con
di
t
i
on o
f
operat
i
ons;
•
internal inefficiencies
;
•
e
q
ui
p
ment failure
;
•
natura
l
or man-ma
d
e
di
sasters
;
an
d
•
w
i
t
h
respect to our
f
oo
d
supp
li
ers, s
h
ortages o
fi
ngre
di
ents or Un
i
te
d
States Department o
f
Agr
i
cu
l
ture
(“USDA”) and United States Food and Dru
g
Administration (“FDA”) compliance issues
.
W
e are dependent on the QVC Shoppin
g
Network for a si
g
nificant percenta
g
e of revenue
.
I
n 2006, sales of our products through our relationship with the QVC Shopping Network accounted for
5%
of
our revenue. For 2007, we
h
ave a one year contractua
l
agreement w
i
t
h
QVC w
i
t
h
an automat
i
c extens
i
on
11