Nutrisystem 2007 Annual Report Download - page 63

The Company issued 400 stock options to non-employees in 2005, in addition to stock options granted in prior
years. These options vested over various periods and resulted in compensation expense of $6 in 2005.
Compensation costs for these stock options were recorded as general and administrative expenses in the
accompanying consolidated statements of operations. The fair value of the stock options issued to non-employees
was determined using the Black-Scholes option pricing model and the following weighted average assumptions:
2005
Dividend yield ............................................................... None
Expected volatility ............................................................ 116.0%
Risk-free interest rate .......................................................... 3.2%
Contract life (in years) ......................................................... 2.5
In 2006 and 2005, the Company authorized the issuance of 2,370 and 3,660 shares of common stock as
compensation to the Board of Directors resulting in compensation expense of $150 and $150, respectively. These
shares were charged to expense when authorized. In addition, in 2007, 2006 and 2005, the Company issued a
total of 4,910, 3,961 and 1,500 shares of common stock, respectively, to non-employees for services. The value
of the shares issued was $250, $200 and $4 in 2007, 2006 and 2005, respectively. The stock-based compensation
costs were recorded in general and administrative expenses in 2007 and 2005 and in marketing expenses in 2006
in the accompanying consolidated statements of operations.
The Company has issued restricted stock to employees generally with terms ranging from three to five years. The
fair value is equal to the market price of the Company’s common stock on the date of grant. Expense for
restricted stock is amortized ratably over the vesting period. The following table summarizes the restricted stock
activity:
Number of
Shares
Weighted-
Average
Grant-Date
Fair Value
Nonvested, January 1, 2005 ....................................... — $ —
Granted ....................................................... 28,010 39.28
Vested ........................................................ — —
Cancelled ..................................................... — —
Nonvested, December 31, 2005 .................................... 28,010 $39.28
Granted ....................................................... 20,976 51.36
Vested ........................................................ (9,336) 39.28
Cancelled ..................................................... — —
Nonvested, December 31, 2006 .................................... 39,650 $45.67
Granted ....................................................... 424,119 44.96
Vested ........................................................ (15,860) 43.65
Cancelled ..................................................... (4,721) 60.73
Nonvested, December 31, 2007 .................................... 443,188 $44.91
The Company recorded compensation of $2,515, $541 and $30 in the accompanying consolidated statement of
operations for 2007, 2006 and 2005, respectively, in connection with the issuance of the restricted shares.
As of December 31, 2007, there was $17,473 of total unrecognized compensation expense related to unvested
share-based compensation arrangements, which is expected to be recognized over a weighted-average period of
1.8 years.
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