Nautilus 2005 Annual Report Download - page 27

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Table of Contents
•
We capitalized on the Nautilus brand with the launch of the Nautilus Institute, a research-based company initiative that provides the
motivation and education to help more people live fit and healthy lives.
•
We repurchased 830,700 shares of our stock for a total investment of $15.6 million and paid dividends to our stockholders of 40
cents per share, or $13.4 million.
Going forward, we expect to reap the benefits of the considerable capital investments we made in 2005. We have very strong demand for
our leading fitness brands, but our operations and manufacturing must catch up with our growing sales demand.
We are excited about 2006 and believe it will represent continued growth and market share expansion. We believe that we have made the
right investments to grow our business, and we are optimistic about the many initiatives we have underway, including leveraging our
innovation pipeline and expanding our retail assortments, to enhance productivity and expand our margins. We are committed to achieving
operational excellence by structuring our efforts around the principles of quality control, customer service and cost reduction.
CRITICAL ACCOUNTING POLICIES
•
We invested $31.6 million in capital expenditures that positioned our Company to reap the benefits of improved efficiency for years
to come. One significant portion of this investment consisted of an ERP system upgrade that will provide greater visibility to
information to manage the business. Another significant portion of this investment was our new world headquarters facility in
Vancouver, Washington, which allowed us to consolidate a large portion of our administrative operations and improve our
Company
’
s ability to better serve customers and attract talent to our Company.
This MD&A is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent
assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates
with the Audit Committee of our Board of Directors. Actual results may differ from these estimates under different assumptions or conditions.
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are
highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting
estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes the following
critical accounting policies reflect its more significant estimates and assumptions used in the preparation of the Consolidated Financial
Statements.
Revenue Recognition
We recognize revenue when products are shipped and we have no significant remaining obligations, persuasive evidence of an
arrangement exists, the price to the buyer is fixed or determinable, collectibility is reasonably assured or probable, and title and risk of loss
have passed. Revenue is recognized net of applicable promotional discounts, rebates, and return allowances, some of which need to be
estimated at the time we recognize revenue. In addition, revenue is recognized upon final installation for the Nautilus commercial equipment if
we are responsible for installation. Return allowances, which reduce product revenue by our best estimate of expected product returns, are
estimated using historical experience. In addition, from time to time, we arrange for leases or other financing sources to enable certain of our
commercial customers to purchase our equipment. In the event that a guarantee of the commercial customer’s lease obligation is made, we
record a
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