Nutrisystem 2014 Annual Report Download - page 24

Laws and regulations directly applicable to communications, operations or commerce over the Internet such as
those governing intellectual property, privacy, libel and taxation, are more prevalent and remain unsettled. If we
are required to comply with new laws or regulations or new interpretations of existing laws or regulations, or if
we are unable to comply with these laws, regulations or interpretations, our business could be adversely affected.
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, including
dietary supplements, as well as 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 revenue and profits.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We currently lease one location in Fort Washington, Pennsylvania. This location totals 119,767 square feet of
office space and our lease expires in 2022. We also had a lease in Hoboken, New Jersey which was 2,515 square
feet of office space which ended in February 2015. Our fulfillment capacity is located in Chambersburg,
Pennsylvania, Allentown, Pennsylvania, Bethlehem, 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 our
outsourced fulfillment capacity is adequate to meet our needs for the foreseeable future.
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