Nautilus 2006 Annual Report Download - page 39

Table of Contents
NAUTILUS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business – Nautilus, Inc. (“Nautilus” or the “Company”) is a leading designer, developer, manufacturer and marketer
of branded fitness and apparel products sold under such well-known brand names as Nautilus, Bowflex, Schwinn Fitness, StairMaster, and
Pearl Izumi. Nautilus was founded in 1986 and incorporated in the State of Washington in 1993. The Company’s headquarters is located in
Vancouver, Washington.
The Company has grown through a combination of internal growth and a series of strategic acquisitions such as Nautilus International,
Inc., the fitness division of Schwinn/GT Corp. and its affiliates, StairMaster Sports/Medical, Inc., and DashAmerica, Inc. d/b/a Pearl Izumi
USA. As a result of these acquisitions, the Company expanded its portfolio of leading brands, product development capabilities, product lines,
distribution channels, and the size of its customer base.
Basis of Presentation – The accompanying consolidated financial statements relate to Nautilus, Inc. and its wholly-
owned subsidiaries as
of December 31, 2006 and 2005, and for the twelve month periods ended December 31, 2006, 2005 and 2004. All intercompany transactions
and balances have been eliminated in consolidation.
Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in the financial statements. Actual results could differ
from those estimates.
Cash and Cash Equivalents –
The Company considers all highly liquid investments with maturities of three months or less at purchase to
be cash equivalents. The Company maintains its cash in bank deposit accounts which at times may exceed federally insured limits. The
Company has not experienced any historical losses in such accounts.
Concentration of Credit Risk and Trade Receivables – Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of trade receivables. The Company generally does not require collateral on its trade receivables. Credit risk on
trade receivables is minimized as a result of the large and diverse nature of the Company’s customer base. The Company maintains allowances
for losses based on the historical experience, the age of outstanding receivables, existing economic conditions, and the expected collectibility of
trade receivables. Creditworthiness of customers is periodically reviewed to help gauge collectibility. If events or changes in circumstances
indicate that specific receivable balances may be impaired, further consideration is given to the collectibility of those balances and the
allowance is adjusted accordingly. Past-due receivable balances are written-off when the Company’s internal collection efforts have been
unsuccessful. For the years ended December 31, allowance for doubtful accounts receivable activity was as follows:
37
(In Thousands)
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Deductions*
Balance at
End of
Period
Allowance for doubtful accounts:
2006
$
4,085
$
1,455
$
(1,647
)
$
3,893
2005
3,252
1,874
(1,041
)
4,085
2004
2,686
985
(419
)
3,252
*
Deductions represent amounts written off against the allowance, net of recoveries.