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Report o
f
Independent Re
gi
stered Publ
i
c Account
i
n
g
F
i
rm
T
he Board of Directors and Stockholders
NutriSystem, Inc.
:
We have audited the accompan
y
in
g
consolidated balance sheets of NutriS
y
stem, Inc. and subsidiaries as o
f
December 31, 2006 and 200
5
, and the related consolidated statements of operations, stockholders’ equity, an
d
cash flows for each of the years in the three-year period ended December 31, 200
6
. These consolidated financia
l
statements are the responsibilit
y
of the Compan
y
’s mana
g
ement. Our responsibilit
y
is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Compan
y
Accountin
g
Oversi
g
ht
B
oard (United States). Those standards re
q
uire that we
p
lan and
p
erform the audit to obtain reasonable assuranc
e
ab
out w
h
et
h
er t
h
e
fi
nanc
i
a
l
statements are
f
ree o
f
mater
i
a
l
m
i
sstatement. An au
di
t
i
nc
l
u
d
es exam
i
n
i
ng, on a test
basis, evidence supportin
g
the amounts and disclosures in the financial statements. An audit also includes
a
ssessing the accounting principles used and significant estimates made by management, as well as evaluatin
g
t
h
e overa
ll fi
nanc
i
a
l
statement presentat
i
on. We
b
e
li
eve t
h
at our au
di
ts prov
id
e a reasona
bl
e
b
as
i
s
f
or ou
r
op
inion
.
I
n our op
i
n
i
on, t
h
e conso
lid
ate
dfi
nanc
i
a
l
statements re
f
erre
d
to a
b
ove present
f
a
i
r
l
y,
i
na
ll
mater
i
a
l
respects,
the financial position of NutriS
y
stem, Inc. and subsidiaries as of December 31, 2006 and 200
5
, and the results o
f
their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, i
n
con
f
orm
i
ty w
i
t
h
U.S. genera
ll
y accepte
d
account
i
ng pr
i
nc
i
p
l
es
.
A
s discussed in Notes 2 and 11 to the consolidated financial statements, effective January 1, 2006, the
C
ompany a
d
opte
d
t
h
e
f
a
i
rva
l
ue met
h
o
d
o
f
account
i
ng
f
or stoc
k
-
b
ase
d
compensat
i
on as requ
i
re
db
y Statement o
f
Financial Accountin
g
Standards No. 123(R), Share-Based Pa
y
ment
.
We a
l
so
h
ave au
di
te
d
,
i
n accor
d
ance w
i
t
h
t
h
e stan
d
ar
d
so
f
t
h
ePu
bli
c Company Account
i
ng Overs
i
g
h
t Boar
d
(United States), the effectiveness of NutriS
y
stem, Inc.’s internal control over financial reportin
g
as of
December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of t
h
e Trea
d
way Commission (COSO
)
,an
d
our report
d
ate
d
Fe
b
ruary 27
,
2007 expressed an unqualified opinion on mana
g
ement’s assessment of, and the effective operation of, interna
l
control over financial reporting.
/
s
/
KPM
G
LL
P
P
hil
a
d
e
l
p
hi
a, Pennsy
l
van
ia
Februar
y
27, 200
7
3
7