Nutrisystem 2008 Annual Report Download - page 53

Recently Issued Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141R, “Business Combinations” and SFAS No. 160,
“Noncontrolling Interests in Consolidated Financial Statements – An Amendment of ARB No. 51.” SFAS Nos.
141R and 160 require most identifiable assets, liabilities, noncontrolling interests and goodwill acquired in a
business combination to be recorded at “full fair value” and require noncontrolling interests (previously referred
to as minority interests) to be reported as a component of equity, which changes the accounting for transactions
with noncontrolling interest holders. Both statements are effective for the Company beginning on January 1,
2009, and early adoption is prohibited. Accordingly, SFAS No. 141R will be applied by the Company to business
combinations occurring on or after January 1, 2009. SFAS No. 160 will be applied prospectively to all
noncontrolling interests, including any that arose before the effective date. The adoption of SFAS No. 160 is not
expected to have any material impact on the Company’s consolidated financial position and results of
operations.
In June 2008, the FASB issued FASB Staff Position (“FSP”) Emerging Issues Task Force (“EITF”) No. 03-6-1,
“Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.”
Under the FSP, unvested share-based payment awards that contain rights to receive nonforfeitable dividends
(whether paid or unpaid) are participating securities, and should be included in the two-class method of
computing EPS. The FSP is effective for fiscal years beginning after December 15, 2008, and for interim periods
within those years. The Company is currently evaluating whether the adoption of the FSP will have an impact on
the Company’s consolidated financial position and results of operations.
In November 2008, the FASB ratified EITF No. 08-6 “Equity Method Investment Accounting Considerations”
which clarifies how to account for certain transactions involving equity method investments. The initial
measurement, decreases in value and changes in the level of ownership of the equity method investment are
addressed. EITF No. 08-6 is effective for the Company beginning on January 1, 2009, consistent with the
effective dates of Statement 141R and Statement 160. EITF No. 08-6 will be applied prospectively. The
Company is currently evaluating whether the adoption of the FSP will have an impact on the Company’s
consolidated financial position and results of operations.
Use of Estimates
The preparation of financial statements in accordance with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of revenue and operating expenses during the
reporting period. Actual results could differ from these estimates.
3. ACQUISITION
On July 1, 2008, the Company acquired certain assets of NuKitchen, a provider of premium, fresh prepared
meals designed to promote weight management and healthy living for an initial cash outlay of $4,000, subject to
$3,000 future payments to the former owners, who became employees of a subsidiary of the Company on July 1,
2008. The future payments to the former owners consist of a $1,500 guaranteed payment paid for the year ended
December 31, 2008 and a second $1,500 earnout payment payable for the year ending December 31, 2009 if
certain financial targets for the year ending December 31, 2009 are achieved. Additionally, the Company
incurred $217 in transaction costs. NuKitchen provides a full menu of fresh, restaurant-quality prepared meals
delivered daily to customers and will expand the Company’s product offerings, menu selection and price points.
The acquisition was accounted for under the purchase method of accounting and the operating results of the
acquired business have been included in the consolidated statements of operations and cash flows from the
acquisition date through December 31, 2008. Revenue of NuKitchen was $1,560 for the period from the date of
acquisition (July 1, 2008) through December 31, 2008.
49