Nautilus 2002 Annual Report Download - page 46

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Emerging Issues Task Force ("EITF") issue No. 00-10, ACCOUNTING FOR SHIPPING AND HANDLING FEES AND COSTS, requires all
amounts billed to a customer in a sale transaction related to shipping and handling, if any, be classified as revenue. Costs incurred for shipping
and handling should be classified as cost of sales. Amounts billed to customers classified as revenue were $42,314, $29,142, and $20,215 for
the years ended December 31, 2002, 2001 and 2000, respectively. Costs incurred for shipping and handling classified as cost of sales were
$24,477, $16,318, and $10,076 for the years ended December 31, 2002, 2001 and 2000, respectively.
SALES RETURNS - The sales return reserve is based on our historical experience of product returns during the trial period in which a
customer can return a product for the full purchase price, less shipping and handling in most instances. The trial periods for Bowflex, Champion
Nutrition, and Nautilus Sleep Systems product lines are six weeks, 30 days, and 90 days, respectively. Trial periods are not offered on our other
product lines. Sales return reserve activity for the years ended December 31, 2002, 2001 and 2000 is as follows:
Balance at Charged to Balance
at
Beginning Sales and Costs End of
of Period and Expenses Deductions* Period
Sales return reserves:
2002 $ 2,100 $ 14,494 $ 14,044 $ 2,550
2001 1,307 12,174 11,381 2,100
2000 787 8,536 8,016 1,307
* Deductions represent product returns, net of recoveries.
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 Nautilus Sleep
Systems, on a prorated basis. The commercial and retail line of fitness products include a lifetime warranty on the frame and structural parts, a
four month to three year warranty on parts, labor, electronics, upholstery, grips and cables, and typically a five year warranty on motors.
Warranty costs are estimated based on the Company's experience and are charged to cost of sales as sales are recognized or as such estimates
change. Warranty reserve activity for the years ended December 31, 2002, 2001 and 2000 is as follows:
Balance at Charged to Balance
at
Beginning Costs and End of
of Period Expenses Deductions* Period
Warranty reserves:
2002 $ 2,413 $ 6,155 $ 3,210 $
5,358
2001 447 3,558 1,592
2,413
2000 383 540 476
447
* Deductions represent warranty claims paid out in the form of cash or product replacements.
RESEARCH AND DEVELOPMENT - Internal research and development costs relating to the development of new products, including
significant improvements and refinements to existing products, are expensed as incurred and included in cost of sales. Third party research and
development costs are expensed when
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2003. EDGAR Online, Inc.