Nutrisystem 2006 Annual Report Download - page 59

T
he Company issued 400 and 33,333 stock options to non-employees in 200
5
and 2004, respectively, in
addi
t
i
on to stoc
k
opt
i
ons grante
di
npr
i
or years. T
h
ese opt
i
ons veste
d
over var
i
ous per
i
o
d
san
d
resu
l
te
di
n
compensation expense of $6 and $102 in 2005 and 2004, respectivel
y
. Compensation costs for these stoc
k
o
ptions were recorded as general and administrative expenses in the accompanying consolidated statements o
f
o
perat
i
ons. T
h
e
f
a
i
rva
l
ue o
f
t
h
e stoc
k
opt
i
ons
i
ssue
d
to non-emp
l
oyees was
d
eterm
i
ne
d
us
i
ng t
h
eB
l
ac
k
-Sc
h
o
l
e
s
o
ption pricin
g
model and the followin
g
wei
g
hted avera
g
e assumptions
:
200
5
2004
D
ividend
y
ield
.....................................................
N
one
N
one
Expecte
d
vo
l
at
ili
t
y
.
................................................
.
11
6
.
0
%7
0
.
0
%
R
i
s
k-fr
ee
in
te
r
est
r
ate
...............................................
3
.
2% 1
.7
%
-
3
.
2%
C
ontract life (in
y
ears
)
............................................... 2.
5
0.2
5
-2.
5
I
n 2006, 200
5
and 2004, the Compan
y
authorized the issuance of 2,370, 3,660 and 3
5
,000 shares of
common stock as compensation to the Board of Directors resulting in a
$
150,
$
150 and
$
100 stock-base
d
compensat
i
on expense, respect
i
ve
l
y. T
h
ese s
h
ares were c
h
arge
d
to expense w
h
en aut
h
or
i
ze
d
.Ina
ddi
t
i
on,
i
n
2
006, 200
5
and 2004, the Compan
y
issued a total of 3,961, 1,
5
00 and
5
8,
5
00 shares of common stock,
respectively, to non-employees for services. The value of the shares issued was
$
200,
$
4 and
$
135 in 2006, 200
5
a
nd 2004, respectively. The stock-based compensation costs were recorded in marketing expenses in 200
6
an
d
g
eneral and administrative expenses in 200
5
and 2004 in the accompan
y
in
g
consolidated statements of
o
perat
i
ons.
A
t December 31, 2006, 2,776,476 shares of common stock are reserved for the exercise of stock o
p
tions,
restr
i
cte
d
s
h
are grants an
d
ot
h
er types o
f
equ
i
ty
i
nvestment t
h
at may
b
e
i
ssue
d
.
Th
e Company
h
as
i
ssue
d
restr
i
cte
d
stoc
k
to emp
l
oyees genera
ll
yw
i
t
h
at
h
ree year vest
i
ng per
i
o
d
.T
h
e
f
a
ir
v
alue is equal to the market price of the Compan
y
’s common stock on the date of
g
rant. Expense for restricted
stock is amortized ratabl
y
over the vestin
g
period. The followin
g
table summarizes the restricted stock activit
y:
N
um
b
e
r
o
f
S
hares
W
eighted
-
A
verage
G
rant-Dat
e
Fair
V
alu
e
Nonvested, December 31, 200
5
................................................
28,010 $39.28
Grante
d
..................................................................
.
20
,
976 51.3
6
Veste
d
....................................................................
(
9,33
6)
39.28
C
ancelle
d
.................................................................
—
—
Nonvested, December 31, 200
6
................................................
3
9,650 $45.67
T
he Company recorded compensation of
$
541 and
$
30 in the accompanying consolidated statement o
f
o
perations for 2006 and 2005, respectively, in connection with the issuance of the restricted shares
.
A
s of December 31, 2006, there was
$
4,162 of total unrecognized compensation expense related to unveste
d
share-based compensation arran
g
ements, which is expected to be reco
g
nized over a wei
g
hted-avera
g
e period of
1.0 years.
S
FAS No. 123R addresses financial instruments issued as part of share-based pa
y
ment arran
g
ements in
exc
h
ange
f
or emp
l
oyee serv
i
ces. Certa
i
no
f
t
h
e Company’s s
h
are-
b
ase
d
payment arrangements are outs
id
et
he
scope o
f
SFAS No. 123R an
d
are su
bj
ect to EITF Issue No. 00-19, “Account
i
n
gf
or Der
i
vat
i
ve F
i
nanc
i
a
l
I
nstruments Indexed to, and Potentiall
y
Settled in, a Compan
y
’s Own Stock,” which requires the stock option
s
h
e
ld b
y certa
i
n non-emp
l
oyee consu
l
tants to
b
e accounte
df
or as
li
a
bili
ty awar
d
s. T
h
e
f
a
i
rva
l
ue o
f
t
h
ese veste
d
a
nd unexercised awards was estimated usin
g
the Black-Scholes option pricin
g
model and $3,223 was reclassifie
d
5
3