Nutrisystem 2008 Annual Report Download - page 37

At December 31, 2008, we had net working capital of $78.4 million, a decrease of $24.9 million from the
$103.3 million net working capital balance at December 31, 2007. Cash and cash equivalents at December 31,
2008 were $38.3 million, a decrease of $2.4 million from the balance of $40.7 million at December 31, 2007. In
addition, we had $1.8 million invested in marketable securities at December 31, 2007. We did not have any
investments in marketable securities at December 31, 2008. Our principal sources of liquidity during this period
were cash flow from operations.
We have a $200.0 million unsecured revolving credit facility with a group of lenders which is committed
until October 2, 2012 with an expansion feature, subject to certain conditions, to increase the facility to $300.0
million. During 2008, we drew down and repaid $35.0 million under this facility. As of December 31, 2008, no
amounts were outstanding. We currently have no off-balance sheet financing arrangements.
In the year ended December 31, 2008, we generated a cash flow of $92.3 million from operations, a
decrease of $15.6 million from 2007. The decrease in cash flow from operations is primarily attributable to lower
net income offset by less of an inventory build during 2008 as compared to 2007. Net changes in operating assets
and liabilities increased cash flow from operations by $20.0 million in 2008. Decreases in inventories ($31.2
million) and other assets ($3.2 million) were partially offset by a decrease in accounts payable ($14.0 million).
In the year ended December 31, 2008, net cash used in investing activities was $14.5 million, primarily due
to spending on capital expenditures of $11.6 million and the acquisition of NuKitchen of $5.7 million. We are
continuing to invest in our ecommerce platform and web initiatives which will allow us to enhance our sales
efforts and be more efficient in testing and in offering new promotional programs.
In the year ended December 31, 2008, net cash used in financing activities was $80.1 million and consisted
of the repurchase of 4.9 million shares of common stock for an aggregate purchase price of $67.1 million and the
payment of dividends of $16.3 million partially offset by the tax benefit from equity compensation awards of
$2.2 million and cash receipts of $1.0 million from the exercise of common stock options.
In August 2006, we announced that our Board of Directors authorized the repurchase of up to $50 million of
our outstanding shares of common stock. Additionally, in February 2007, our Board of Directors authorized a
repurchase program of up to $200 million of outstanding shares of common stock and, in October 2007,
authorized the repurchase of an additional $100 million of outstanding shares of common stock. The stock
repurchase programs from 2007 have an expiration date of March 31, 2009 and also may be limited or terminated
by us at any time without prior notice. The repurchased shares have been retired.
On July 1, 2008, we acquired certain assets of NuKitchen, a provider of premium, fresh prepared meals
designed to promote weight management and healthy living, for an initial cash outlay of $4.0 million, subject to
certain future payments to the former owners, who became employees of one of our subsidiaries on July 1, 2008.
The future payments to the former owners consist of a $1.5 million guaranteed payment paid for the year ended
December 31, 2008 and a second $1.5 million earnout payment payable for the year ending December 31, 2009 if
certain financial targets for the year ending December 31, 2009 are achieved. Additionally, we have incurred
$217,000 in transaction costs. We commenced our operational transition of NuKitchen during the fourth quarter
of 2008.
The Board of Directors declared quarterly dividends of $0.175 per share, which were paid on May 15,
2008, August 15, 2008 and November 17, 2008. The next quarterly dividend of $0.175 per share is payable on
March 16, 2009 to shareholders of record as of March 6, 2009. Although the Company intends to continue to pay
regular quarterly dividends, the declaration and payment of future dividends are discretionary and will be subject
to quarterly determination by the Board of Directors following its review of the Company’s financial
performance.
33