Nutrisystem 2015 Annual Report Download - page 48

NUTRISYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
1. BACKGROUND
Nature of the Business
Nutrisystem, Inc. (the “Company” or “Nutrisystem”) is a provider of weight management products and services,
including nutritionally balanced weight loss programs, multi-day kits available at select retail locations and
digital tools to support weight loss. The weight loss programs are designed for women and men. Additionally, the
Nutrisystem®D®program is designed specifically to help people with Type 2 diabetes who want to lose weight
and manage their diabetes. The Nutrisystem®programs are based on over 40 years of nutrition research. The
Company’s pre-packaged foods are sold directly to weight loss program participants primarily through the
Internet and telephone (including the redemption of prepaid program cards), referred to as the direct channel,
through QVC, a television shopping network, and select retailers. Approximately 99% of revenue for each of the
years ended December 31, 2015, 2014 and 2013 was generated in the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Presentation of Financial Statements
The Company’s consolidated financial statements include 100% of the assets and liabilities of Nutrisystem, Inc.
and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.
Cash Equivalents and Short Term Investments
Cash equivalents include only securities having a maturity of three months or less at the time of purchase. At
December 31, 2015 and 2014, demand accounts and money market funds comprised all of the Company’s cash
and cash equivalents.
Short term investments consist of investments in government and agency securities and corporate debt securities
with original maturities of greater than three months at the time of purchase. The Company classifies these
investments as available-for-sale securities. These investments are reported at fair value with the related
unrealized gains and losses included in accumulated other comprehensive (loss) income, a component of
stockholders’ equity, net of related tax effects.
The Company evaluates its investments for other-than-temporary impairment by reviewing factors such as the
length of time and extent to which fair value has been below cost basis and the Company’s ability and intent to
hold the investment for a period of time which may be sufficient for anticipated recovery of the market value.
There were no other-than-temporary impairments in 2015, 2014 or 2013.
Inventories
Inventories consist principally of packaged food held in outside fulfillment locations. Inventories are valued at
the lower of cost or market, with cost determined using the first-in, first-out method. Quantities of inventory on
hand are continually assessed to identify excess or obsolete inventory and a provision is recorded for any
estimated loss. The reserve is estimated for excess and obsolete inventory based primarily on forecasted demand
and/or the Company’s ability to sell the products, introduction of new products, future production requirements
and changes in customers’ behavior. The reserve for excess and obsolete inventory was $1,253 and $460 at
December 31, 2015 and 2014, respectively.
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