Nutrisystem 2011 Annual Report Download - page 66

ended December 31, 2009 including a reversal of a $3,749 valuation allowance established in 2008 for deferred
tax assets related to prior Zero Water losses and impairment charges. These Zero Water losses and impairment
charges were considered realizable during the year ended December 31, 2009 due to the terms of the
abandonment which changed the tax loss from capital to ordinary which the Company believes is more likely
than not to realize.
The total amount of gross unrecognized tax benefits as of December 31, 2011 and 2010 was $1,919 and $2,478,
respectively. The total amount of unrecognized tax benefits that, if recognized, would affect the effective income
tax rate is approximately $1,247 and $1,611, as of December 31, 2011 and 2010, respectively. The Company
records accrued interest and penalties related to unrecognized tax benefits as part of interest expense. During
2011, 2010 and 2009, the Company recognized $133, $99 and $70, respectively, in interest and penalties. The
Company’s federal income tax returns for 2008 through 2011 are open and are subject to examination by the
Internal Revenue Service. State tax jurisdictions that remain open to examination range from 2000 through 2011.
The Company does not believe that that there will be any material changes to unrecognized tax positions over the
next 12 months.
A reconciliation of the beginning and ending amounts of the total unrecognized tax benefit is as follows:
Year Ended December 31,
2011 2010 2009
Balance at beginning of year .................................. $2,478 $1,375 $1,193
Increase related to current year tax positions ...................... 85 1,184 182
Reductions related to settlement of tax matters .................... 0 (42) 0
Decrease due to lapse of statute of limitations ..................... (644) (39) 0
Balance at end of year ....................................... $1,919 $2,478 $1,375
12. DISCONTINUED OPERATIONS
In the fourth quarter of 2007, the Company committed to a plan to sell its subsidiary, Slim and Tone LLC (“Slim
and Tone”) and this subsidiary has been treated as a discontinued operation. Accordingly, the operating results of
this discontinued operation have been presented separately from continuing operations for all periods presented.
The plan to sell was not completed and operations ceased as of December 31, 2009. Slim and Tone had revenues
of $65 and pre-tax losses of $390 for the year ended December 31, 2009.
In the first quarter of 2010, the Company committed to a plan to sell the business operations conducted by
NuKitchen, as it was no longer aligned with the business direction of the Company. The Company was
unsuccessful in locating a buyer for the NuKitchen business and, therefore, it closed the business during 2010.
NuKitchen has been treated as a discontinued operation. Accordingly, the operating results of this discontinued
operation have been presented separately from continuing operations for all periods presented. NuKitchen had
revenues of $1,707 and $3,113 and pre-tax losses of $808 and $6,091 (including impairment charge) for the years
ended December 31, 2010 and 2009, respectively.
13. EQUITY INSTRUMENTS
Equity Incentive Plans
The Company had three equity incentive plans: the 1999 Equity Incentive Plan, the 2000 Equity Incentive Plan
and the 2008 Long-Term Incentive Plan (collectively, the “Equity Incentive Plans”). The 2008 Long-Term
Incentive Plan is currently the only plan under which new awards may be granted. Under that plan, a variety of
equity instruments can be granted to key employees including incentive and nonqualified stock options to
purchase shares of the Company’s common stock, restricted stock, restricted stock units or shares of common
stock. The 1999 Equity Incentive Plan, the 2000 Equity Incentive Plan and the 2008 Long-Term Incentive Plan
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