Nutrisystem 2008 Annual Report Download - page 62

for adopting SFAS No. 123R. Under this method, the provisions of SFAS No. 123R apply to all awards granted
or modified after the date of adoption. Accordingly, prior periods have not been restated. SFAS No. 123R also
requires the benefits of tax deductions in excess of recognized compensation expense be recognized as financing
cash flows, rather than as operating cash flows as prescribed under the prior accounting rules.
In 2008, 2007 and 2006, the Company recorded pre-tax compensation charges of $402, $1,764 and $2,387,
respectively, in the accompanying consolidated statements of operations for the portion of previously granted
stock option awards that vested after January 1, 2006. There were no option grants in 2008, 2007 or 2006. The
total intrinsic value of stock options exercised in 2008, 2007 and 2006 was $10,072, $21,822 and $69,088,
respectively.
In 2008 and 2006, the Company authorized the issuance of 31,794 and 2,370 shares of common stock as
compensation to the Board of Directors resulting in compensation expense of $455 and $150, respectively. These
shares were charged to expense when authorized. In addition, in 2008, 2007 and 2006, the Company issued a
total of 17,470, 4,910 and 3,961 shares of common stock, respectively, to non-employees for services. The value
of the shares issued was $250, $250 and $200 in 2008, 2007 and 2006, respectively. The stock-based
compensation costs were recorded in general and administrative expenses in 2008 and 2007 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, 2006 ....................................... 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
Granted ...................................................... 1,131,105 17.36
Vested ....................................................... (94,865) 44.25
Cancelled ..................................................... (79,081) 36.22
Nonvested, December 31, 2008 .................................... 1,400,347 $23.19
The Company recorded compensation of $6,950, $2,515 and $541 in the accompanying consolidated statements of
operations for 2008, 2007 and 2006, respectively, in connection with the issuance of the restricted shares. As of
December 31, 2008, there was $25,606 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.
SFAS No. 123R addresses financial instruments issued as part of share-based payment arrangements in exchange
for employee services. Certain of the Company’s share-based payment arrangements are outside the scope of
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