SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Summary Of Significant Accounting Policies [Abstract] | ' |
Presentation of Financial Statements, Policy | ' |
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Presentation of Financial Statements |
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The Company’s consolidated financial statements include 100% of the assets and liabilities of Nutrisystem, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. |
Cash Equivalents and Short Term Investments, Policy | ' |
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Cash Equivalents and Short Term Investments |
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Cash equivalents include only securities having a maturity of three months or less at the time of purchase. At December 31, 2013 and December 31, 2012, demand accounts and money market accounts comprised all of the Company’s cash and cash equivalents. |
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Short term investments consist of investments in government and agency securities, corporate debt securities and time deposits with original maturities of greater than three months at the time of purchase. The Company classifies these investments as available-for-sale securities. These investments are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of stockholders’ equity, net of related tax effects. |
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The Company evaluates its investments for other-than-temporary impairment by reviewing factors such as the length of time and extent to which fair value has been below cost basis and the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery of the market value. There were no other-than-temporary impairments in 2013, 2012 or 2011. |
Inventories, Policy | ' |
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Inventories |
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Inventories consist principally of packaged food held in outside fulfillment locations. Inventories are valued at the lower of cost or market, with cost determined using the first-in, first-out (FIFO) method. Quantities of inventory on hand are continually assessed to identify excess or obsolete inventory and a provision is recorded for any estimated loss. The reserve is estimated for excess and obsolete inventory based primarily on forecasted demand and/or the Company’s ability to sell the products, introduction of new products, future production requirements and changes in customers’ behavior. The reserve for excess and obsolete inventory was $725 and $636 at December 31, 2013 and 2012, respectively. |
Fixed Assets, Policy | ' |
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Fixed Assets |
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Fixed assets are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets, which are generally two to seven years. Leasehold improvements are amortized on a straight-line basis over the lesser of the estimated useful life of the asset or the related lease term. Expenditures for repairs and maintenance are charged to expense as incurred, while major renewals and improvements are capitalized. |
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Included in fixed assets is the capitalized cost of internal-use software and website development incurred during the application development stage. Capitalized costs are amortized using the straight-line method over the estimated useful life of the asset, which is generally two to five years. Costs incurred related to planning or maintenance of internal-use software and website development are charged to expense as incurred. The net book value of capitalized software was $11,473 and $10,511 at December 31, 2013 and 2012, respectively. |
Long-Lived Assets, Policy | ' |
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Long-Lived Assets |
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The Company continually evaluates whether events or circumstances have occurred that would indicate that the remaining estimated useful lives of long-lived assets may warrant revision or that the remaining balance may not be recoverable. Long-lived assets are evaluated for indicators of impairment. When factors indicate that long-lived assets should be evaluated for possible impairment, an estimate of the related undiscounted cash flows over the remaining life of the long-lived assets is used to measure recoverability. If any impairment is indicated, measurement of the impairment will be based on the difference between the carrying value and fair value of the asset, generally determined based on the present value of expected future cash flows associated with the use of the asset. As of December 31, 2013, management believes that no reductions to the remaining useful lives or write-downs of long-lived assets are required. |
Derivative Instruments, Policy | ' |
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Derivative Instruments |
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Interest rate swap agreements, a type of financial derivative instrument, have been utilized by the Company to reduce interest rate risk on credit facility borrowings. The Company designated and accounted for its interest rate swaps as cash flow hedges of variable-rate debt. The effective portion of the gain or loss on the derivative was reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity in the accompanying consolidated balance sheets, net of tax, and reclassified into earnings in the periods during which the hedged transactions affected earnings. To the extent that the change in value of the derivative did not perfectly offset the change in value of the items being hedged, that ineffective portion was immediately recognized in earnings. There were no interest rate swap agreements at December 31, 2013 and 2012. |
Revenue Recognition, Policy | ' |
Revenue Recognition |
Revenue from direct to consumer product sales is recognized when the earnings process is complete, which is upon transfer of title to the product. Recognition of revenue upon shipment meets the revenue recognition criteria in that persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed and determinable and collection is reasonably assured. The Company also sells prepaid program cards to wholesalers and retailers. Revenue from these cards is recognized after the card is redeemed online at the Company’s website or via telephone by the customer and the product is shipped to the customer. Revenue from the retail programs is recognized when the product is received at the seller’s location. |
Deferred revenue consists primarily of unredeemed prepaid gift cards and unshipped frozen foods. When a customer orders the frozen program, two separate shipments are delivered. The first shipment contains Nutrisystem’s standard shelf-stable food. The second shipment contains the frozen foods and is generally delivered within a week of a customer’s order. Both shipments qualify as separate units of accounting and the fair value is based on estimated selling prices of both units. |
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Direct to consumer customers may return unopened shelf-stable products within 30 days of purchase in order to receive a refund or credit. Frozen products are non-returnable and non-refundable unless the order is canceled within 14 days of delivery. Estimated returns are accrued at the time the sale is recognized and actual returns are tracked monthly. The Company reviews its history of actual versus estimated returns to ensure reserves are appropriate. |
Revenue from product sales includes amounts billed for shipping and handling and is presented net of estimated returns and billed sales tax. Revenue from the retail programs is also net of any trade allowances, reclamation reserves or broker commissions. Revenue from shipping and handling charges was $2,000, $2,394 and $2,867 in 2013, 2012 and 2011, respectively. Shipping-related costs are included in cost of revenue in the accompanying consolidated statements of operations. |
Dependence on Suppliers, Policy | ' |
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Dependence on Suppliers |
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In 2013, approximately 14% and 12%, respectively, of inventory purchases were from two suppliers. The Company has supply arrangements with these suppliers that require the Company to make minimum purchases. In 2012, these suppliers provided approximately 17% and 13%, respectively, of inventory purchases and in 2011, approximately 16% and 15%, respectively, of inventory purchases (see Note 7). Additionally, the Company was dependent on one frozen food supplier for less than 20% of its food costs in 2011. The Company had a supply agreement with this supplier that expired in November 2011, and the Company found other frozen food supply options to replace this supplier. In 2013, a charge of $5,000 was recorded to settle certain disputes that had arisen with a supplier over a legacy contract. This charge is included in cost of revenue in the accompanying consolidated statements of operations. |
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The Company outsources 100% of its fulfillment operations to a third party provider and more than 95% of its orders are shipped by one third party provider. |
Vendor Rebates, Policy | ' |
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Vendor Rebates |
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One of the Company’s suppliers provides for rebates based on purchasing levels. The Company accounts for this rebate on an accrual basis as purchases are made at a rebate percentage determined based upon the estimated total purchases from the vendor. The estimated rebate is recorded as a receivable from the vendor with a corresponding reduction in the carrying value of purchased inventory, and is reflected in the consolidated statements of operations when the associated inventory is sold. The rebate period is June 1 through May 31 of each year. For the years ended December 31, 2013, 2012 and 2011, the Company reduced cost of revenue by $1,068, $1,496 and $1,401, respectively, for these rebates. A receivable of $182 and $637 at December 31, 2013 and 2012, respectively, has been recorded in receivables in the accompanying consolidated balance sheets. Historically, the actual rebate received from the vendor has closely matched the estimated rebate recorded. An adjustment is made to the estimate upon determination of the final rebate. |
Marketing Expense, Policy | ' |
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Marketing Expense |
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Marketing expense includes media, advertising production, marketing and promotional expenses and payroll-related expenses, including share-based payment arrangements, for personnel engaged in these activities. Media expense was $77,396, $86,948 and $88,828 in 2013, 2012 and 2011, respectively. Direct-mail advertising costs are capitalized if the primary purpose was to elicit sales to customers who could be shown to have responded specifically to the direct mailing and results in probable future economic benefits. The capitalized costs are amortized to expense over the period during which the future benefits are expected to be received. Typically, this period falls within 40 days of the initial direct mailing. All other advertising costs are charged to expense as incurred or the first time the advertising takes place. At December 31, 2013 and 2012, $1,010 and $1,998, respectively, of costs have been prepaid for future advertisements and promotions. |
Lease Related Expenses, Policy | ' |
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Lease Related Expenses |
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Certain of the Company’s lease contracts contain rent holidays, various escalation clauses, or landlord/tenant incentives. The Company records rental costs, including costs related to fixed rent escalation clauses and rent holidays, on a straight-line basis over the lease term. Lease allowances utilized for space improvement are recorded as leasehold improvement assets and amortized over the shorter of the economic useful life of the asset or the lease term. Tenant lease incentive allowances received are recorded as deferred rent and amortized as reductions to rent expense over the lease term. Included in the accompanying consolidated balance sheets is $2,956 of a tenant improvement allowance at December 31, 2013, of which $345 is included in other accrued expenses and current liabilities and $2,611 in non-current liabilities. At December 31, 2012, the tenant improvement allowance was $3,301, of which $345 was included in other accrued expenses and current liabilities and $2,956 in non-current liabilities. |
Income Taxes, Policy | ' |
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Income Taxes |
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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. |
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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, Policy | ' |
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Segment Information |
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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, Policy | ' |
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Earnings Per Share |
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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: |
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| | Year Ended December 31, | |
| | 2013 | | | 2012 | | | 2011 | |
Net income (loss) | | $ | 7,370 | | | $ | (2,805 | ) | | $ | 12,261 | |
Net income allocated to unvested restricted stock | | | (183 | ) | | | 0 | | | | (460 | ) |
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Net income (loss) allocated to common shares | | $ | 7,187 | | | $ | (2,805 | ) | | $ | 11,801 | |
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Weighted average shares outstanding: | | | | | | | | | | | | |
Basic | | | 28,013 | | | | 27,499 | | | | 27,033 | |
Effect of dilutive securities | | | 274 | | | | 0 | | | | 292 | |
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Diluted | | | 28,287 | | | | 27,499 | | | | 27,325 | |
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Basic income (loss) per common share | | $ | 0.26 | | | $ | (0.10 | ) | | $ | 0.44 | |
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Diluted income (loss) per common share | | $ | 0.25 | | | $ | (0.10 | ) | | $ | 0 .43 | |
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In 2012, diluted loss per common share is identical to basic loss per common share as the Company was in a net loss position and the impact of including common stock equivalents is anti-dilutive. In 2013, 2012 and 2011, common stock equivalents representing 786, 1,637 and 657 shares of common stock, respectively, were excluded from weighted average shares outstanding for diluted income per common share purposes because the effect would be anti-dilutive. |
Share-Based Payment Awards, Policy | ' |
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Share-Based Payment Awards |
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The cost of all share-based awards to employees and non-employees, including grants of stock options, restricted stock and restricted stock units, is recognized in the financial statements based on the fair value of the awards at grant date. The fair value of stock option awards is determined using the Black-Scholes valuation model on the date of grant. The fair value of restricted stock and performance-based restricted stock unit awards is equal to the market price of the Company’s common stock on the date of grant. The fair value of market-based restricted stock unit awards is determined using the Monte Carlo simulation model on the date of grant. |
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The fair value of share-based awards is recognized on a straight-line basis over the requisite service period (derived service period for market-based restricted stock unit awards), net of estimated forfeitures. The Company relies primarily upon historical experience to estimate expected forfeitures and recognizes compensation expense on a straight-line basis from the date of grant. The Company issues new shares upon exercise of stock options, granting of restricted stock or vesting of restricted stock units. |
Recently Issued Accounting Pronouncements, Policy | ' |
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Recently Issued Accounting Pronouncements |
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In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-11 which provides that an unrecognized tax benefit, or portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction of a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward. If an applicable deferred tax asset is not available or the tax law does not require the company to use and the company does not expect to use the applicable deferred tax asset for such purpose, the unrecognized tax benefit should be presented as a liability in the financial statements and should not be combined with an unrelated deferred tax asset. ASU 2013-11 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date; however, retrospective application is permitted. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements. |
Use of Estimates, Policy | ' |
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Use of Estimates |
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The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and operating expenses during the reporting period. Actual results could differ from these estimates. |