Nutrisystem 2014 Annual Report Download - page 59

amount it expects is more likely than not to be realized due to the short carryforward period for this temporary
difference. Based on the projected level of future taxable income over the periods in which the deferred tax assets
are deductible, management believes it is more likely than not that the Company will realize the remaining net
deferred tax assets. An analysis of the activity of the valuation allowance for the year ended December 31, 2014
is as follows:
Balance at beginning of year .................................................... $800
Additions charged to expense ................................................... 0
Deductions .................................................................. 0
Balance at end of year ......................................................... $800
The total amount of gross unrecognized tax benefits as of December 31, 2014, 2013 and 2012 was $332, $311
and $1,474, respectively. The total amount of unrecognized tax benefits that, if recognized, would affect the
effective income tax rate is approximately $216, $202 and $958 as of December 31, 2014, 2013 and 2012,
respectively. The Company records accrued interest and penalties related to unrecognized tax benefits as part of
interest expense, net. During 2014, 2013 and 2012, the Company recognized interest income of $28, $71 and
$13, respectively, from interest and penalties. The Company’s federal income tax returns for 2011 through 2013
are open and are subject to examination by the Internal Revenue Service. State tax jurisdictions that remain open
to examination range from 2011 through 2013. 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,
2014 2013 2012
Balance at beginning of year .................................. $311 $1,474 $1,919
Increase related to current year tax positions ...................... 15 60 67
Increase related to prior year tax positions ........................ 138 0 0
Reductions related to settlement of tax matters .................... 0 0 (224)
Decrease due to lapse of statute of limitations ..................... (132) (1,223) (288)
Balance at end of year ....................................... $332 $ 311 $1,474
10. EQUITY INSTRUMENTS
Equity Incentive Plans
The Company has three equity incentive plans: the 1999 Equity Incentive Plan, the 2000 Equity Incentive Plan
and the Amended and Restated 2008 Long-Term Incentive Plan (collectively, the “Equity Incentive Plans”). The
Amended and Restated 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 and directors
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 Amended and Restated 2008 Long-Term Incentive Plan authorize up to 1,000,
5,600 and 5,400 shares of common stock, respectively, for issuance. At December 31, 2014, the Amended and
Restated 2008 Long-Term Incentive Plan had 1,776 shares available for grant.
Under each of the plans, the Board of Directors determines the term of each award, but no award can be exercisable
more than 10 years from the date the award is granted. The stock options issued under the Equity Incentive Plans
generally expire between seven and 10 years from the grant date. The Board also determines the vesting provisions
of all awards and the exercise price per share of stock options issued under the plans, which is the fair market value
at date of grant. Awards issued to employees generally vest over terms ranging from two to four years.
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