Nutrisystem, Inc. Reports Fourth Quarter and Full Year 2009 Results; Announces Quarterly Dividend of $0.175 Per Share

HORSHAM, Pa.-- (BUSINESS WIRE) -- Nutrisystem, Inc. (NASDAQ: NTRI), a leading provider of weight management products and services, today reported financial results for the fourth quarter and year ended 2009, including adjusted EPS from continuing operations prior to the previously announced one-time impairment charge related to Nu-Kitchen, of $0.18 for fourth quarter 2009 and $1.02 for the full year 2009. Highlights for the quarter and full year ended December 31, 2009 include:

Fourth Quarter 2009

• Revenues of $106.2 million as compared to $114.6 million for Q4 2008;
• Operating income from continuing operations of $4.0 million as compared to $8.9 million for Q4 2008;
• Net income of $2.7 million, or $0.09 per diluted share, which included the one- time Nu-Kitchen impairment charge reflected in depreciation and amortization expense. This compares to Q4 2008 net loss of $3.3 million, or $(0.11) per diluted share;
• Adjusted EPS from continuing operations of $0.18 before previously announced Nu-Kitchen one-time impairment charge of $2.9 million (net of tax) or $0.09 per share; and
• Adjusted EBITDA of $14.5 million compared to $13.5 million for Q4 2008. Adjusted EBITDA is defined as income from continuing operations excluding non-cash employee compensation, other income or expense, equity and impairment loss, interest, income taxes and depreciation and amortization.

Full Year 2009

• Revenues of $527.7 million as compared to $687.7 million for 2008;
• Operating income from continuing operations of $43.3 million as compared to $90.1 million for 2008;
• Net income of $28.8 million, or $0.92 per diluted share, which included the one-time Nu-Kitchen impairment charge reflected in depreciation and amortization expense. This compares to 2008 net income of $46.3 million, or $1.45 per diluted share;
• Adjusted EPS from continuing operations of $1.02 before previously announced Nu-Kitchen one-time impairment charge of $2.9 million (net of tax) or $0.09 per share; and
• Adjusted EBITDA of $68.9 million as compared to $106.4 million for 2008. Adjusted EBITDA is defined as income from continuing operations excluding non-cash employee compensation, other income or expense, equity and impairment loss, interest, income taxes and depreciation and amortization.

“2009 was a year of challenges for the U.S. consumer. Our revenue was suppressed by these macro-economic conditions. We were encouraged in the second half of the year as we started to close the gap with improvements in new customer starts and full implementation of cost reductions within the organization,” stated Chairman and CEO Joe Redling. “The macro-economic headwinds continue to impact the diet category, and while the first month of 2010 was challenging we are encouraged by recent signs that year over year growth can be achieved.”

The Board of Directors declared the Company’s quarterly dividend of $0.175 per share, payable March 22, 2010, to shareholders of record as of March 11, 2010. While the Company intends to continue to pay regular quarterly dividends, the declaration and payment of future dividends are discretionary and will be subject to determination by the Board of Directors each quarter following its review of the Company’s financial performance.

“In the second half of 2009, we saw improvement in trends in revenue, new customers, gross margin as well as reduced G&A expenses. While we expect these trends to continue into 2010, their impact will be offset in the first quarter by higher media rates and one-time costs related to retail,” said David Clark, Chief Financial Officer. “For the full year 2010, we expect these pressures to subside, and anticipate a modest year-over-year profitability improvement.”

Conference Call and Webcast

Management will host a webcast to discuss fourth quarter and year end 2009 financial results as well as the outlook for 2010 today at 4:30 PM Eastern time. The webcast will include remarks from Chairman and Chief Executive Officer Joe Redling and Chief Financial Officer David Clark.

The webcast will be available live under the Investor Relations section of Nutrisystem's website, www.nutrisystem.com. Please click on Investor Relations at the bottom of the home page and then click on the microphone icon on the Investor Relations home page. Interested parties unable to access the conference call via the webcast may dial 1-866-831-9862 (outside US/Canada 706-758-5226); the conference ID is 56501256. A replay of the conference call will be available on the Company website following the event.

About Nutrisystem, Inc.

Nutrisystem, Inc. (NASDAQ: NTRI) is a leading provider of weight management products and services. Nutrisystem is sold direct to the consumer through nutrisystem.com, by phone, and at select retailers, for convenient home delivery. The Company offers proven nutritionally balanced weight loss programs designed for women, men, and seniors, as well as the clinically tested Nutrisystem D plan, designed to help people with type 2 diabetes who want to lose weight. The Nutrisystem program is based on 35 years of nutrition research and the science of the low glycemic index, and offers a variety of great tasting, satisfying high-fiber, heart healthy, good carbohydrate meals that contain zero trans fats. Nutrisystem was named the “Best Value” of the six most popular commercial diet programs by SmartMoney magazine in January, 2010. The program has no membership fees and provides 24/7 weight management support by trained weight loss coaches and online weight management tools free of charge. In 2009 Nutrisystem was selected as the #1 overall online retailer in the Food and Drug category and #46 out of the top 500 online retailers overall by Internet Retailer Magazine. Nutrisystem also proudly supports the American Diabetes Association in its Movement to Stop Diabetes. For more information or to become a customer visit http://www.nutrisystem.com or call 1-800-435-4074.

Forward-Looking Statement Disclaimer

This press release may contain forward-looking statements that are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements regarding Nutrisystem’s plans and expectations for the first quarter of 2010 and the full year 2010, continuing to reduce costs and improve operating efficiency, continuing to pay regular quarterly dividends and other statements that are not statements of historical fact constitute forward-looking statements. These forward-looking statements involve a number of risks and uncertainties, which are described in Nutrisystem, Inc.'s Annual Report on Form 10-K and its other filings with the Securities and Exchange Commission. The actual results may differ materially from any forward-looking statements due to such risks and uncertainties. Nutrisystem, Inc. undertakes no obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.

NUTRISYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share amounts) Three Months Ended Year Ended December 31, December 31,

2009

2008

2009

2008

REVENUE $ 106,197 $ 114,563 $ 527,731 $ 687,741 COSTS AND EXPENSES: Cost of revenue 48,690 53,539 243,690 326,453 Marketing 28,031 26,578 147,017 175,027 General and administrative 17,609 23,214 77,389 87,605 Depreciation and amortization 7,909 2,338 16,294 8,508 Total costs and expenses 102,239 105,669 484,390 597,593 Operating income from continuing operations 3,958 8,894 43,341 90,148 OTHER INCOME (EXPENSE) 68 (1,061 ) 407 (1,145 ) EQUITY AND IMPAIRMENT LOSS — (6,798 ) (4,000 ) (9,458 ) INTEREST INCOME (EXPENSE), net 120 (54 ) 106 454

Income from continuing operations before income taxes

4,146 981 39,854 79,999

INCOME TAXES

1,269 4,338 10,818 33,572 Income (loss) from continuing operations 2,877 (3,357 ) 29,036 46,427 DISCONTINUED OPERATIONS:

(Loss) gain on discontinued operations, net of income taxes

(159 ) 28

(246

)

(174

)

Net income (loss) $ 2,718 $ (3,329 ) $ 28,790 $ 46,253 BASIC INCOME (LOSS) PER COMMON SHARE: Income (loss) from continuing operations $ 0.09 $ (0.11 ) $ 0.94 $ 1.48 Net loss from discontinued operations — — (0.01 ) (0.01 ) Net income (loss) $ 0.09 $ (0.11 ) $ 0.93 $ 1.47 DILUTED INCOME (LOSS) PER COMMON SHARE: Income (loss) from continuing operations $ 0.09 $ (0.11 ) $ 0.93 $ 1.46 Net loss from discontinued operations — — (0.01 ) (0.01 ) Net income (loss) $ 0.09 $ (0.11 ) $ 0.92 $ 1.45 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 29,610 29,516 29,458 30,684 Diluted 30,075 29,907 29,769 31,172 NUTRISYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands, except share and per share amounts) Year Ended December 31, 2009 2008

ASSETS

CURRENT ASSETS: Cash and cash equivalents $ 32,198 $ 38,309 Marketable securities 30,324 — Receivables 13,057 17,200 Inventories, net 52,012 50,986 Prepaid income taxes 2,420 3,714 Deferred income taxes 2,756 1,651 Other current assets 10,682 8,611 Current assets of discontinued operation 166 325 Total current assets 143,615 120,796 FIXED ASSETS, net 21,164 24,312 EQUITY INVESTMENT — 4,000 GOODWILL — 2,717 IDENTIFIABLE INTANGIBLE ASSETS, net 250 2,590 OTHER ASSETS 5,758 5,056 $ 170,787 $ 159,471

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES: Accounts payable $ 32,488 $ 31,448 Accrued payroll and related benefits 1,097 2,150 Deferred revenue 3,853 4,964 Other accrued expenses and current liabilities 2,653 3,743 Current liabilities of discontinued operation 183 43 Total current liabilities 40,274 42,348 NON-CURRENT LIABILITIES 1,550 1,298 Total liabilities 41,824 43,646 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY:

Preferred stock, $.001 par value (5,000,000 shares authorized, no shares issued and outstanding)

— —

Common stock, $.001 par value (100,000,000 shares authorized; shares issued – 30,949,784 at December 31, 2009 and 30,784,920 at December 31, 2008)

29 29 Additional paid-in capital 6,515 — Retained earnings

122,503

115,771

Accumulated other comprehensive (loss) income

(84

)

25

Total stockholders’ equity

128,963

115,825

$ 170,787 $ 159,471 NUTRISYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) Year Ended December 31, 2009 2008 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 28,790 $ 46,253 Adjustments to reconcile net income to net cash provided by operating activities: Loss on discontinued operation 246 174 Depreciation and amortization 16,294 8,508 Loss (gain) on disposal of fixed assets 113 (71 ) Share–based expense 9,382 7,978 Deferred income tax (benefit) expense (1,397 ) 493 Equity and impairment loss 4,000 9,458 Changes in operating assets and liabilities: Accrued interest income — 19 Receivables 4,199 1,840 Inventories (929 ) 31,237 Other assets (2,431 ) 3,248 Accounts payable 949 (13,970 ) Accrued payroll and related benefits (1,054 ) 245 Deferred revenue (1,111 ) 4,964 Income taxes 1,341 (6,664 ) Other accrued expenses and liabilities (825 ) (1,231 ) Net cash provided by operating activities of continuing operations 57,567 92,481 Net cash used in operating activities of discontinued operation (103 ) (192 ) Net cash provided by operating activities 57,464 92,289 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities (30,344 ) — Sales of marketable securities — 1,750 Cash paid for acquisition of business — (5,717 ) Capital additions (8,352 ) (11,624 ) Proceeds from the sale of fixed assets 125 1,120 Net cash used in investing activities (38,571 ) (14,471 ) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under credit facility — 35,000 Repayments of borrowings under credit facility — (35,000 ) Exercise of stock options 563 1,022 Equity compensation awards, net (2,170 ) 2,184 Repurchase and retirement of common stock (1,939 ) (67,085 ) Payment of dividends (21,421 ) (16,251 ) Net cash used in financing activities (24,967 ) (80,130 ) Effect of exchange rate changes on cash and cash equivalents (193 ) (247 ) NET DECREASE IN CASH AND CASH EQUIVALENTS (6,267 ) (2,559 )

CASH AND CASH EQUIVALENTS, beginning of year

38,631 41,190

CASH AND CASH EQUIVALENTS, end of year

32,364 38,631 LESS CASH AND CASH EQUIVALENTS OF DISCONTINUED OPERATION, end of year 166 322

CASH AND CASH EQUIVALENTS OF CONTINUING OPERATIONS, end of year

$ 32,198 $ 38,309 NUTRISYSTEM, INC. AND SUBSIDIARIES ADJUSTED EBITDA RECONCILIATION TO GAAP RESULTS (in thousands) Three Months Ended December 31, Year Ended December 31, 2009 2008 2009 2008 Adjusted EBITDA $ 14,523 $ 13,501 $ 68,935 $ 106,355

Non-cash employee compensation expense

(2,656 ) (2,269 ) (9,300 ) (7,699 ) Other income (expense) 68 (1,061 ) 407 (1,145 ) Equity and impairment loss — (6,798 ) (4,000 ) (9,458 ) Interest income (expense), net 120 (54 ) 106 454 Income taxes (1,269 ) (4,338 ) (10,818 ) (33,572 )

Depreciation and amortization

(7,909 ) (2,338 ) (16,294 ) (8,508 ) Income (loss) from continuing operations $ 2,877 $ (3,357 ) $ 29,036 $ 46,427

Adjusted EBITDA is defined as income from continuing operations excluding non-cash employee compensation, other income or expense, equity and impairment loss, interest, income taxes and depreciation and amortization. We believe Adjusted EBITDA is a useful performance metric for management and investors because it is more indicative of the ongoing operations of the company.

Adjusted EBITDA excludes certain non-cash and non-operating items to facilitate comparisons and provide a meaningful measurement that is focused on the performance of the ongoing operations of the Company.

NUTRISYSTEM, INC. AND SUBSIDIARIES EPS IMPACT OF NU-KITCHEN RECONCILIATION TO GAAP RESULTS (in thousands) Three Months Ended December 31, Year Ended December 31, 2009 2008 2009 2008

Adjusted income (loss) from continuing operations

$ 5,783 $ (3,357 ) $ 31,942 $ 46,427 Impairment loss (4,541 ) — (4,541 ) — Income taxes associated with impairment loss 1,635 — 1,635 — Income (loss) from continuing operations $ 2,877 $ (3,357 ) $ 29,036 $ 46,427 Diluted income per common share: Income (loss) from continuing operations $ 0.09 $ (0.11 ) $ 0 .93 $ 1 .46 Adjusted income (loss) from continuing operations $ 0.18 $ (0.11 ) $ 1.02 $ 1 .46

The reconciliation to GAAP results for the three months and year ended December 31, 2009 and 2008, respectively, does not reflect any adjustment for the impact of Zero Water equity and impairment loss or any tax consequences related to the impairment.

Nutrisystem, Inc.

Cindy Warner

Investor Relations

Tel: 215-346-8136

Email: IR@nutrisystem.com