Nautilus 2001 Annual Report Download - page 45

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DIRECT FOCUS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 2001
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Direct Focus Inc. (the "Company," a Washington corporation) is a leading marketer, developer and manufacturer of branded health and fitness
products sold under such well-known brands as Nautilus, Bowflex, Schwinn and StairMaster. These products are distributed through well
established direct to consumer, commercial and retail channels. Our consumer and commercial fitness equipment products include a full line of
cardiovascular and weight resistance products such as home gyms, free weight equipment, treadmills, stationary bikes, steppers and ellipticals.
Our healthy lifestyle products also include a line of advanced sleep systems and nutritional products. As a result of the acquisition of the Fitness
Division of Schwinn/GT Corp. ("Schwinn Fitness") in September 2001, the Company incorporated the Nautilus/Schwinn Fitness Group, Inc.,
DF Hebb Industries, Inc., Schwinn Fitness International SA, Schwinn Holdings International SA, and Schwinn Fitness SA, which include
commercial and retail cardio fitness equipment and accessories, into the commercial/retail segment of the business.
CONSOLIDATION
The consolidated financial statements of the Company include Direct Focus, Inc., Nautilus HPS, Inc., Nautilus, Inc., DFI Properties, LLC, BFI
Advertising, Inc., DFI Sales, Inc., Nautilus/Schwinn Fitness Group, Inc., DF Hebb Industries, Inc., Schwinn Fitness International SA, Schwinn
Holdings International SA, Schwinn Fitness SA and Nautilus Fitness Products, Inc. All inter-company transactions have been eliminated in the
preparation of the consolidated financial statements.
The accounts of foreign operations are measured using the local currency as the functional currency. These accounts are translated into U.S.
dollars using exchange rates in effect at year-end for assets and liabilities and the average exchange rate during the period for the results of
operations. Translation adjustments are accumulated as a separate component of equity and comprehensive income.
USE OF ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The most significant estimates included in the preparation of the financial statements are related to warranty
reserves, sales return reserves, and allowance for doubtful accounts.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, cash deposited with banks and financial institutions and highly liquid debt instruments
purchased with maturity dates of three months or less at the date of acquisition. The Company maintains its cash in bank deposit accounts,
which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.
41
2002. EDGAR Online, Inc.