Nautilus 2005 Annual Report Download - page 38

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Table of Contents
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123 (revised 2004), “Share-Based
Payment
” (“SFAS No. 123R”), which will be effective for the Company’s first quarter beginning January 1, 2006. The new standard will
require us to expense stock options and other share based payments. The statement requires companies to assess the most appropriate model to
calculate the value of the options. We currently use the Black-Scholes option-pricing model to value options and are currently assessing which
model we will use in the future. We have not determined the financial impact of implementing SFAS No. 123R on the Company’s financial
statements.
In November 2004, the FASB issued SFAS No. 151, “Inventory Costs” .
This statement clarifies the accounting for abnormal amounts of
idle facility expense and freight and handling costs when those costs may be so abnormal as to require treatment as period charges. This
statement is effective for the Company’s first quarter beginning January 1, 2006. We do not anticipate this pronouncement will have a material
impact on the consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We have primarily invested cash with banks and in liquid debt instruments purchased with maturity dates of less than one year. Our bank
deposits may exceed federally insured limits, and there is risk of loss of the entire principal with any debt instrument. To reduce risk of loss, we
limit our exposure to any individual debt issuer and require certain minimum ratings for debt instruments that we purchase.
Foreign Exchange Risk
The Company is exposed to foreign exchange risk from currency fluctuations, mainly in Europe and Canada. Given the relative size of
the Company’s current foreign operations, the Company does not believe the exposure to changes in applicable foreign currencies to be
material, such that it could have a significant impact on our current or near-term financial position, results of operations, or cash flows.
Management estimates the maximum impact on stockholders’ equity of a 10% change in any applicable foreign currency to be $1.2 million.
Interest Rate Risk
The Company is exposed to market risk for changes in interest rates related to its credit agreements. The credit agreements are at variable
interest rates and as of December 31, 2005, the Company had outstanding borrowings under the credit facility of $40.1 million. Due to the
short-term nature of these borrowings, management believes that any reasonably possible near-term changes in related interest rates would not
have a material impact on the Company’s financial position, results of operations, or cash flows.
The Company has historically invested in liquid debt instruments purchased with maturity dates of less than one year. Due to the short-
term nature of those investments, management believes that any reasonably possible near-term changes in related interest rates would not have
a material impact on the Company’s financial position, results of operations, or cash flows.
37