Nutrisystem 2015 Annual Report Download - page 51

expense over the lease term. Included in the accompanying consolidated balance sheets is $2,266 of a tenant
improvement allowance at December 31, 2015, of which $345 is included in other accrued expenses and current
liabilities and $1,921 in non-current liabilities. At December 31, 2014, the tenant improvement allowance was
$2,611, of which $345 was included in other accrued expenses and current liabilities and $2,266 in non-current
liabilities.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases
and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the
consolidated statements of operations in the period that includes the enactment date. In assessing the ability to
realize deferred tax assets, the Company considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized.
A tax benefit from an uncertain tax position may be recognized only if it is “more likely than not” that the
position is sustainable, based on its technical merits. The tax benefit of a qualifying position is the largest amount
of tax benefit that is greater than 50% likely of being realized upon settlement with a taxing authority having full
knowledge of all relevant information. The liability for unrecognized tax benefits is classified as noncurrent
unless the liability is expected to be settled in cash within 12 months of the reporting date. The Company records
accrued interest and penalties related to unrecognized tax benefits as part of interest expense, net.
Segment Information
The Company is managed and operated as one business. The entire business is managed by a single management
team that reports to the chief executive officer. Revenue consists primarily of food sales.
Earnings Per Share
The Company uses the two-class method to calculate earnings per share (“EPS”) as the unvested restricted stock
issued under the Company’s equity incentive plans are participating shares with nonforfeitable rights to
dividends. Under the two-class method, earnings per common share are computed by dividing the sum of
distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by
the weighted average number of common shares outstanding for the period. In applying the two-class method,
undistributed earnings are allocated to both common shares and participating securities based on the number of
weighted average shares outstanding during the period. Undistributed losses are not allocated to unvested
restricted stock as the restricted stockholders are not obligated to share in the losses. The following table sets
forth the computation of basic and diluted EPS:
Year Ended December 31,
2015 2014 2013
Net income ........................................................ $26,143 $19,311 $ 7,370
Net income allocated to unvested restricted stock .......................... (306) (368) (183)
Net income allocated to common shares ................................. $25,837 $18,943 $ 7,187
Weighted average shares outstanding:
Basic ......................................................... 28,695 28,323 28,013
Effect of dilutive securities ....................................... 480 464 274
Diluted ....................................................... 29,175 28,787 28,287
Basic income per common share ....................................... $ 0.90 $ 0.67 $ 0.26
Diluted income per common share ..................................... $ 0.89 $ 0.66 $ 0.25
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