Nutrisystem 2006 Annual Report Download - page 52

P
rior to the adoption of SFAS No. 123R, had compensation cost for the Company’s common stock option
s
b
een
d
eterm
i
ne
db
ase
d
upon t
h
e
f
a
i
rva
l
ue o
f
t
h
e opt
i
ons at t
h
e
d
ate o
f
grant, as prescr
ib
e
d
un
d
er SFAS No. 123
,
a
s amended b
y
SFAS No. 148, the Compan
y
’s net income and net income per share would have been chan
g
ed to
the following pro forma amounts
:
Y
ear Ended December
31,
200
5 2
00
4
Net
i
ncome
:
A
s reporte
d
.........................................................
$
21
,
015
$
1
,
01
9
Add: stock-based emplo
y
ee compensation expense included in reported net income
,
n
etoftax ............................................................. 16
—
I
mpact o
f
tota
l
stoc
k
-
b
ase
d
compensat
i
on expense
d
eterm
i
ne
d
un
d
er
f
a
i
r-va
l
u
e
based method for all rewards, net of ta
x
.....................................
(1,404) (728
)
P
ro
f
orm
a
...........................................................
$
19,627 $ 291
B
as
i
c net
i
ncome per s
h
are:
A
sre
p
orte
d
......................................................... $ 0.64 $ 0.0
3
P
r
o
f
o
rm
a
........................................................... $ 0.60 $ 0.01
Diluted net income
p
er share:
A
s reporte
d
.........................................................
$
0.59
$
0.0
3
P
ro
f
orm
a
...........................................................
$
0.58
$
0.01
I
nca
l
cu
l
at
i
ng pro
f
orma compensat
i
on, t
h
e
f
a
i
rva
l
ue o
f
eac
h
stoc
k
opt
i
on was est
i
mate
d
on t
h
e
d
ate o
f
g
rant usin
g
the Black-Scholes option pricin
g
model and the followin
g
wei
g
hted avera
g
e assumptions:
2
005 2004
Di
v
id
en
d
y
i
e
ld
........................................................
None None
Expected volatilit
y
.....................................................
11
7.
1% 122
.
2%
Ri
s
k
-
f
ree
i
nterest rate
.
................................................
.
4.04% 3.86%
Expecte
d lif
e(
i
n years) .................................................
5
.
65
.
6
C
ash Flow In
f
ormat
i
on
T
he Company made payments for income taxes of
$
32,000,
$
307 and
$
40 and minimal interest payments i
n
2
006, 200
5
and 2004, respectivel
y
.
R
ecently Issued Account
i
ng Pronouncement
s
I
n September 200
6
, the Securities and Exchan
g
e Commission (“SEC”) issued Staff Accountin
g
Bulletin
(
“SAB”) No. 108, “Quantif
y
in
g
Misstatements.” SAB 108 provides interpretative
g
uidance on how publi
c
compan
i
es quant
if
y
fi
nanc
i
a
l
statement m
i
sstatements. T
h
ere
h
ave
b
een two common approac
h
es use
d
t
o
quantif
y
such errors. Under an income statement approach, the “roll-over” method, the error is quantified as th
e
a
mount b
y
which the current
y
ear income statement is misstated. Alternativel
y
, under a balance sheet approach
,
t
h
e“
i
ron curta
i
n” met
h
o
d
,t
h
e error
i
s quant
ifi
e
d
as t
h
e cumu
l
at
i
ve amount
b
yw
hi
c
h
t
h
e current year
b
a
l
anc
e
sheet is misstated. In SAB 108, the SEC established an a
pp
roach that re
q
uires
q
uantification of financia
l
statement misstatements based on the effects of the misstatements on each of the compan
y
’s financial statements
a
n
d
t
h
ere
l
ate
dfi
nanc
i
a
l
statement
di
sc
l
osures. T
hi
smo
d
e
li
s common
l
yre
f
erre
d
to as a “
d
ua
l
approac
h
”
b
ecause
it requires quantification of errors under both the roll-over and iron curtain methods. SAB 108 is effective for th
e
f
irst fiscal
y
ear endin
g
after November 1
5
, 2006. The adoption of SAB 108 did not have a material impact on the
C
ompany’s conso
lid
ate
dfi
nanc
i
a
l
pos
i
t
i
on an
d
resu
l
ts o
f
operat
i
ons
.
4
6