Nutrisystem 2011 Annual Report Download - page 25

Future laws or regulations, including laws or regulations affecting our marketing and advertising practices,
relations with consumers, employees, service providers, or our services and products, may have an adverse
impact on us.
The sale of ingested products involves product liability and other risks.
Like other distributors of products that are ingested, we face an inherent risk of exposure to product liability
claims if the use of our products results in illness or injury. The foods that we resell in the U.S. are subject to
laws and regulations, including those administered by the USDA and FDA that establish manufacturing practices
and quality standards for food products. Product liability claims could have a material adverse effect on our
business as existing insurance coverage may not be adequate. Distributors of weight loss food products, vitamins,
nutritional supplements and minerals, including our predecessor businesses, have been named as defendants in
product liability lawsuits from time to time. The successful assertion or settlement of an uninsured claim, a
significant number of insured claims or a claim exceeding the limits of our insurance coverage would harm us by
adding costs to the business and by diverting the attention of senior management from the operation of the
business. We may also be subject to claims that our products contain contaminants, are improperly labeled,
include inadequate instructions as to use or inadequate warnings covering interactions with other substances.
Product liability litigation, even if not meritorious, is very expensive and could also entail adverse publicity for
us and reduce our revenue. In addition, the products we distribute, or certain components of those products, may
be subject to product recalls or other deficiencies. Any negative publicity associated with these actions would
adversely affect our brand and may result in decreased product sales and, as a result, lower revenues and profits.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We currently lease one location in Horsham, Pennsylvania and one in Fort Washington, Pennsylvania.
These two locations total approximately 171,157 square feet of office space. The lease in Horsham expires in
2018. The lease for our Fort Washington location expires in 2022. We have additional fulfillment capacity in
Chambersburg, Pennsylvania, Allentown, Pennsylvania and Sparks, Nevada through an outsourced provider. We
have no lease obligations to any of our outsourced fulfillment providers; however, we are subject to minimum
space commitments which we may reduce over a specified period of time. Management believes the outsourced
fulfillment capacity is adequate to meet our needs for the foreseeable future.
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