Nutrisystem 2014 Annual Report Download - page 56

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In January and June 2012, respectively, the Company entered into two separate $10,000 notional value forward-
starting interest rate swaps. The objective of the hedges was to eliminate the variability of cash flows in interest
payments for $20,000 of floating rate debt. The swaps were terminated and expensed during 2012 upon the
termination of a previous $100,000 credit facility and repayment of outstanding borrowings thereunder. In
addition, the Company had two separate $10,000 notional values floating to fixed interest rate swap agreements
that matured on August 3, 2012 and September 28, 2012, respectively. As of December 31, 2014 and 2013, the
Company had no outstanding interest rate swaps.
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases its corporate headquarters and certain equipment. These leases generally have initial terms
of one to 12 years and have renewal options for additional periods. Certain of the leases also contain escalation
clauses based upon increases in costs related to the properties. Lease obligations, with initial or remaining terms
of one or more years, consist of the following at December 31, 2014:
2015 ..................................................................... $ 2,732
2016 ..................................................................... 2,694
2017 ..................................................................... 2,725
2018 ..................................................................... 2,784
2019 ..................................................................... 2,844
Thereafter ................................................................. 7,620
$21,399
Total rent expense for 2014, 2013 and 2012 was $2,237, $2,261 and $4,807, respectively.
Litigation
The Company is involved in various claims and routine litigation matters. In the opinion of management, after
consultation with legal counsel, the outcomes of such matters are not anticipated to have a material adverse effect
on the Company’s consolidated financial position, results of operations or cash flows in future years.
Contractual Commitments
The Company has entered into supply agreements with various food vendors. Several of these agreements
provide for annual pricing, annual purchase obligations, as well as exclusivity in the production of certain
products, with terms of five years or less. One agreement also provides rebates if certain volume thresholds are
exceeded. The Company has total purchase obligations of $54,445 as of December 31, 2014. The Company
anticipates it will meet all annual purchase obligations outstanding at December 31, 2014.
Certain agreements with frozen food suppliers required advance payments to the supplier. The Company was
notified during 2012 that one of these suppliers was in default with its bank lender and was in the process of
negotiating a work out plan and exploring other strategic alternatives. The Company recorded an impairment
charge in 2012 of $2,100 related to this advance due to the work out plan. The impairment was recorded in
general and administrative expense in the accompanying statement of operations. The remaining advances to this
supplier of $690 were collected by the Company in 2013. During 2013, the Company received payment of these
outstanding advances.
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