Nautilus 2000 Annual Report Download - page 32

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Management reviews the investment in long-lived assets for possible impairment whenever events or circumstances indicate the carrying
amount of an asset may not be recoverable. There have been no such events or circumstances in the three years ended December31, 2000. If
there were an indication of impairment, management would prepare an estimate of future cash flows (undiscounted and without interest
charges) expected to result from the use of the asset and its eventual disposition. If these cash flows were less than the carrying amount of the
asset, an impairment loss would be recognized to write down the asset to its estimated fair value.
Other Assets
Other assets consist of license agreements, patents and trademarks. Amortization is computed using the straight-line method over estimated
useful lives of three to twenty years. The trademark associated with the Nautilus acquisition was valued at $4,349,839 and is being amortized
over twenty years. Accumulated amortization was $272,183 and $510,374 at December31, 1999 and 2000, respectively.
Warranty Costs
The Company's warranty policy provides for coverage for defects in material and workmanship. Warranty periods on the Company's products
range from two years to limited lifetime on the Bowflex lines of fitness products and twenty years on airbeds. The Nautilus commercial line of
fitness products includes a lifetime warranty on the structural frame, welded moving parts and weight stacks, a 120-day warranty on upholstery
and padded items, and a one-year warranty on all other parts.
Revenue Recognition
Revenue from product sales is generally recognized at the time of shipment. Revenue is recognized upon installation for the Nautilus
commercial equipment, if the Company's truck fleet is used for delivery of the products.
Net Sales
In the fourth quarter of 2000, the Company adopted Emerging Issues Task Force Consensus 00-10 "Accounting for Shipping and Handling
Costs" (EITF 00-10). As a result, the Company now accounts for revenue generated by shipping products to customers as net sales. Previously,
these amounts were included in cost of sales along with the related costs incurred to ship the products. Net sales and cost of sales for prior
periods have been restated to reflect EITF 00-10. This change has no effect on reported net income or earnings per share.
Research and Development
Internal research and development costs are expensed as incurred and included in cost of sales. Third party research and development costs are
expensed when the contracted work has been performed.
Research and development expense was $64,973, $716,240 and $1,186,216 for 1998, 1999 and 2000, respectively.
Stock-Based Compensation
The Company continues to measure compensation expense for its stock-based employee compensation plans using the method prescribed by
APB Opinion No.25, " Accounting for Stock Issued to Employees ." The Company provides pro forma disclosures of net income and earnings
per share as if
31
2002. EDGAR Online, Inc.