Nutrisystem 2011 Annual Report Download - page 41

Liquidity, Capital Resources and Other Financial Data
The capital and credit markets have become more volatile as a result of the recent global economic
conditions, which has caused a general tightening in the credit markets, lower levels of liquidity and increased
financing costs. Despite these factors, we believe that available capital resources are sufficient to fund our
working capital requirements, capital expenditures, income tax obligations, dividends and share repurchases for
the foreseeable future. As our previous credit agreement was set to expire in 2012, we entered into a $100 million
amended and restated credit agreement that extended the commitment period and replaced our previous
agreement.
At December 31, 2011, we had working capital of $76.2 million, an increase of $2.2 million from the $74.0
million working capital balance at December 31, 2010. Cash and cash equivalents at December 31, 2011 were
$47.6 million, an increase of $27.2 million from the balance of $20.4 million at December 31, 2010. In addition,
we had $10.0 million invested in marketable securities at December 31, 2011 as compared to $20.8 million at
December 31, 2010. Our principal sources of liquidity during this period were cash flows from operations.
We have a $100.0 million unsecured revolving credit facility with a group of lenders which is committed
until December 5, 2016 with an expansion feature, subject to certain conditions, to increase the facility to $180.0
million.
In 2011, we generated cash flow of $47.3 million from operating activities, a decrease of $19.3 million from
2010. The decrease in cash flow from operations is primarily attributable to lower net income for 2011 and net
changes in operating assets and liabilities primarily driven by inventory balances and the use of supplier
advances.
In 2011, net cash provided by investing activities was $2.9 million primarily from the $20.9 million sale of
marketable securities reduced by purchases of marketable securities of $10.1 million and capital additions of $8.0
million. We are continuing to invest in our ecommerce and web platform to incorporate new product initiatives.
In 2011, net cash used in financing activities was $23.0 million, a decrease of $45.6 million from 2010.
During 2011, we did not repurchase any of our shares of common stock as compared to $75.0 million spent to
purchase shares in 2010.
On July 28, 2011, we announced that our Board of Directors had authorized the repurchase of up to $150.0
million of our outstanding shares of common stock in open-market transactions on the NASDAQ Stock Market
or through privately negotiated transactions, including block transactions. The timing and actual number of
shares repurchased depend on a variety of factors including price, corporate and regulatory requirements,
alternative investment opportunities and other market conditions. The stock repurchase program has an
expiration date of June 30, 2013 but may be limited or terminated at any time without prior notice.
Our Board of Directors declared quarterly dividends of $0.175 per share, which were paid on March 17,
2011, May 19, 2011, August 18, 2011 and November 25, 2011. Subsequent to December 31, 2011, our Board of
Directors declared a quarterly dividend of $0.175 per share payable on March 26, 2012 to stockholders of record
as of March 15, 2012. Although we intend to continue to pay regular quarterly dividends, the declaration and
payment of future dividends are discretionary and will be subject to quarterly determination by our Board of
Directors following its review of our financial performance.
Seasonality
Typically in the weight loss industry, revenue is strongest in the first calendar quarter and lowest in the
fourth calendar quarter. We believe our business experiences seasonality, driven by the predisposition of dieters
to initiate a diet and the price and availability of certain media.
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