Nutrisystem 2009 Annual Report Download - page 57

premium product in a down economy were unsustainable after conducting market tests during the fourth quarter
of 2009, particularly with respect to the higher-end consumer segment.
December 31, 2009 December 31, 2008
Gross
Accumulated
Amortization Net Gross
Accumulated
Amortization Net
Amortizable intangible assets:
Customer lists ........................ $ 500 $ 500 $— $ 500 $250 $ 250
Trademark ........................... 1,800 1,550 250 1,800 90 1,710
Technology .......................... 700 700 — 700 70 630
Total .................................... $3,000 $2,750 $250 $3,000 $410 $2,590
The identifiable intangible assets are amortized on a straight-line basis. Amortization expense for 2009
(including the goodwill and intangible asset impairment charge of $4,541) and 2008 (for the period from the
acquisition date through December 31, 2008) was $5,057 and $410, respectively. The remaining $250 trademark
will be amortized over five years.
6. EQUITY INVESTMENT
On October 11, 2007, the Company purchased 1,320,650 Series A Preferred Units from Zero Water, at a
purchase price of $10.60 per Series A unit for an aggregate purchase price of $14,258, which included
acquisition costs of $259. This represented an approximately 27% fully diluted equity interest in Zero Water.
This investment was accounted for under the equity method of accounting.
During the fourth quarter of 2008, the Company recorded an impairment charge of $6,483 to reduce the carrying
value of the equity investment to its estimated fair value of $4,000. The impairment charge primarily resulted
from lower-than-expected operating results and projections of future performance coupled with the current
non-strategic business direction of Zero Water and the overall general economic decline which indicated that the
full carrying value of the equity investment was not recoverable. The charge was recorded as equity and
impairment loss in the accompanying consolidated statements of operations.
In June 2009, the Company abandoned its interest in Zero Water as management determined that the business
was no longer aligned with the Company’s current strategic direction. An equity and impairment loss of $4,000
was recorded to write-off the remaining investment. An equity loss of $2,975 and $800 was recorded in 2008 and
2007 (subsequent to the initial investment), respectively, for the Company’s share of Zero Water’s loss and
amortization expense for the difference between the cost and the underlying equity in net assets of Zero Water at
the investment date.
7. CREDIT FACILITY
On October 2, 2007, the Company executed a credit agreement with a group of lenders that provides for a
$200,000 unsecured revolving credit facility with an expansion feature, subject to certain conditions, to increase
the facility to $300,000 (the “Credit Facility”). During 2008, the Company drew down and repaid the Credit
Facility in the amount of $35,000. No amounts were borrowed during 2009. There were no amounts outstanding
as of December 31, 2009 or 2008.
The Credit Facility provides for interest at either a floating rate, which will be a base rate, or a Eurocurrency rate
equal to the London Inter-Bank Offered Rate for the relevant term, plus an applicable margin. The base rate will
be the higher of the lender’s base rate or one-half of one percent above the Federal Funds Rate. The Credit
Facility is also subject to 0.15% per annum unused fee payable quarterly. During 2009 and 2008, the Company
paid $0 and $49 in interest, respectively, and $304 and $303 in an unused line fee, respectively. Interest
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