Nutrisystem 2006 Annual Report Download - page 23

third parties and our existing insurance coverage may not be adequate. Distributors of weight loss food products,
vi
tam
i
ns, nutr
i
t
i
ona
l
supp
l
ements an
d
m
i
nera
l
s,
i
nc
l
u
di
ng our pre
d
ecessor
b
us
i
nesses,
h
ave
b
een name
d
as
d
efendants in product liabilit
y
lawsuits from time to time. The successful assertion or settlement of an uninsure
d
claim, a significant number of insured claims or a claim exceeding the limits of our insurance coverage woul
d
h
arm us
b
ya
ddi
ng costs to t
h
e
b
us
i
ness an
db
y
di
vert
i
ng t
h
e attent
i
on o
f
sen
i
or management
f
rom t
h
e operat
i
on
o
f the business. We ma
y
also be sub
j
ect to claims that our products contain contaminants, are improperl
y
labeled
,
include inadequate instructions as to use or inadequate warnings covering interactions with other substances
.
Pro
d
uct
li
a
bili
ty
li
t
i
gat
i
on, even
if
not mer
i
tor
i
ous,
i
s very expens
i
ve an
d
cou
ld
a
l
so enta
il
a
d
verse pu
bli
c
i
ty
f
or
u
s and reduce our revenue.
I
TEM 1B.
U
NRE
SO
LVED
S
TAFF
CO
MMENT
S
N
one.
I
TEM 2. PROPERTIE
S
We current
l
y
l
ease two
l
ocat
i
ons
i
n Hors
h
am, Pennsy
l
van
i
aan
d
one
l
ocat
i
on
i
n Yar
dl
ey, Pennsy
l
van
i
a. T
h
e
two Horsham locations total approximatel
y
12
5
,300 square feet of office and warehouse space at a combine
d
a
nnual rent of
$
1,252,368. One lease in Horsham ex
p
ires in 2009, while the other ex
p
ires in 2010. In December
200
6
, we signed a third lease in Horsham, Pennsylvania with approximately 87,123 square feet of office space
which we do not
y
et occup
y
. Rent pa
y
ments will be approximatel
y
$856,710 in 2007. This lease expires in 2011
.
We also lease 950 square feet at an annual rent of
$
14,250 in Yardley, Pennsylvania. This lease expires i
n
Septem
b
er 2007. We
h
ave a
ddi
t
i
ona
lf
u
lfill
ment capac
i
ty
i
nC
h
am
b
ers
b
urg, Pennsy
l
van
i
a; Spar
k
s, Neva
d
a
;
Edwardsville, Kansas; McDonou
g
h, Geor
g
ia; Dallas, Texas; and Madison, Illinois throu
g
h an outsource
d
provider. We also use an additional third party fulfillment provider in Warminster, Pennsylvania during periods
of
pea
kd
eman
d
.We
h
ave no
l
ease o
bli
gat
i
ons to any o
f
our outsource
df
u
lfill
ment prov
id
ers. Managemen
t
believes the Horsham facilities, combined with the outsourced fulfillment capacit
y
, are adequate to meet our
needs for the foreseeable future.
I
TEM 3. LEGAL PROCEEDING
S
None.
I
TEM 4.
SU
BMI
SS
I
O
N
O
F MATTER
S
T
O
AV
O
TE
O
F
S
E
CU
RITY H
O
LDER
S
N
one submitted
.
1
7