Nutrisystem 2011 Annual Report Download - page 21

A significant number of states require that customers be notified if a security breach results in the disclosure
of their personal financial account or other information. Additional states and governmental entities are
considering such “notice” laws. In addition, other public disclosure laws may require that material security
breaches be reported. If we experience a security breach and such notice or public disclosure is required in the
future, our reputation and our business may be harmed.
In the ordinary course of our business, we collect and utilize proprietary and customer information and data.
Privacy concerns among prospective and existing customers regarding our use of such information or data
collected on our website or through our services and products, such as weight management information, financial
data, email addresses and home addresses, could keep them from using our website or purchasing our services or
products. We currently face certain legal obligations regarding the manner in which we treat such information
and data. Businesses have been criticized by privacy groups and governmental bodies for their use and handling
of such information and data. Currently, a significant number of our customers authorize us to bill their credit
cards directly for fees charged by us. We rely on third party software products to secure our credit card
transactions. Although we have developed systems and processes that are designed to protect consumer
information and prevent fraudulent payment transactions and other security breaches, failure to prevent or
mitigate such fraud or breaches or changes in industry standards or regulations may adversely affect our business
and operating results.
We may experience fluctuations in our operating results which may cause our stock price to be volatile.
We have experienced and expect to continue to experience fluctuations in our quarterly results of
operations. Our business is seasonal, with revenues generally stronger in the first quarter and weaker in the fourth
quarter. The market price of our common stock is subject to fluctuations in response to our operating results,
general trends in the weight loss industry, announcements by our competitors, our ability to meet or exceed
securities analysts’ expectations, recommendations by securities analysts, the condition of the financial markets
and other factors. These fluctuations, as well as general economic and market conditions, may adversely affect
the market price of our common stock and cause it to fluctuate significantly.
Future acquisitions and the pursuit of new business opportunities present risks, and we may be unable to
achieve the financial and strategic goals of any acquisition or new business.
A component of our growth strategy may be to acquire existing businesses or pursue other business
opportunities in the market for weight management and fitness products and services. Even if we succeed in
acquiring or building such businesses, we will face a number of risks and uncertainties, including:
• difficulties in integrating newly acquired or newly started businesses into existing operations, which
may result in increasing operating costs that would adversely affect our operating income and earnings;
• the risk that our current and planned facilities, information systems, personnel and controls will not be
adequate to support our future operations;
• diversion of management time and capital resources from our existing businesses, which could
adversely affect their performance and our operating results;
• dependence on key management personnel of acquired or newly started businesses and the risk that we
will be unable to integrate or retain such personnel;
• the risk that the new products or services we may introduce or begin offering, whether as a result of
internal expansion or business acquisitions, will not gain acceptance among consumers and existing
customers;
• the risk that new efforts may have a detrimental effect on our brand;
• the risk that we will face competition from established or larger competitors in the new markets we
may enter, which could adversely affect the financial performance of any businesses we might acquire
or start; and
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