Nutrisystem 2014 Annual Report Download - page 61

The Company has issued restricted stock to employees generally with vesting terms ranging from two to four
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 for 2012, 2013 and 2014:
Number
of Shares
Weighted-
Average
Grant-Date
Fair Value
Aggregate
Intrinsic
Value
Nonvested, January 1, 2012 .............................. 863 $16.43
Granted .............................................. 510 $10.50
Vested ............................................... (497) $15.25
Forfeited ............................................. (46) $12.49
Nonvested, December 31, 2012 ........................... 830 $13.71
Granted .............................................. 312 $ 8.84
Vested ............................................... (293) $12.72
Forfeited ............................................. (163) $12.64
Nonvested, December 31, 2013 ........................... 686 $12.17
Granted .............................................. 116 $14.99
Vested ............................................... (303) $11.31
Forfeited ............................................. (77) $12.21
Nonvested, December 31, 2014 ........................... 422 $13.56 $8,248
Additionally, the Company grants performance-based and market-based restricted stock units. The performance-
based units have performance conditions and service-based vesting conditions. Each vesting tranche is treated as
an individual award and the compensation expense is recognized on a straight-line basis over the requisite service
period for each tranche. The requisite service period is a combination of the performance period and the
subsequent vesting period based on continued service. The level of achievement of such goals may cause the
actual amount of units that ultimately vest to range from 0% to 150% of the original units granted. The Company
recognizes expense ratably over the vesting period for performance-based restricted stock units when it is
probable that the performance criteria specified will be achieved. The fair value is equal to the market price of
the Company’s common stock on the date of grant.
In 2012, grants of restricted stock units contained market-based conditions. Market-based awards entitle
employees to vest in a number of units determined by the Company’s stock price return as compared to a set of
comparator companies over a period, and will range from 0% to 200% of the original units granted. The fair
value is calculated using a Monte Carlo simulation model on the date of grant. Compensation expense is
recognized over the derived service periods using the straight-line method regardless of the outcome of the
market conditions, so long as the award holder remains an employee through the requisite service period. These
awards contained different measurement periods.
The fair value of the market-based restricted stock units utilized the following inputs and assumptions:
2 Years 3 Years 3.1 Years
Closing stock price on grant date ......................................... $11.23 $11.23 $ 7.31
Performance period starting price ........................................ $12.78 $12.78 $ 8.17
Term of award (in years) ............................................... 2 3 3.1
Volatility ............................................................ 50.99% 51.66% 48.29%
Risk-free interest rate .................................................. 0.30% 0.47% 0.34%
Expected dividend yield ................................................ 6.05% 6.05% 9.15%
Fair value ........................................................... $10.70 $12.34 $ 7.40
57