Nautilus 2007 Annual Report Download - page 42

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 products sold under such well-known brand names as Nautilus, Bowflex, Schwinn Fitness and StairMaster. Nautilus was
founded in 1986 and incorporated in the State of Washington in 1993. The Company’s headquarters is located in Vancouver, Washington.
In the fourth quarter of 2007, management committed to a plan to sell the operations of our fitness apparel division. Our fitness apparel division
consists of DashAmerica, Inc. d/b/a Pearl Izumi USA (“Pearl Izumi”)
which designs, markets and sells branded fitness apparel and footwear sold
primarily under the Pearl Izumi brand on a global basis. In February 2008, the Company entered into an agreement to sell Pearl Izumi and the
Company expects to complete the sale late in the first quarter of 2008. Accordingly, all assets and liabilities and results of operations associated
with Pearl Izumi have been presented in the consolidated financial statements as discontinued operations separate from continuing operations in
accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets
(“SFAS 144”). See Note 2 “Discontinued Operations.”
Basis of Presentation
– The accompanying consolidated financial statements relate to Nautilus, Inc. and its wholly-owned subsidiaries as of
December 31, 2007 and 2006, and for the twelve month periods ended December 31, 2007, 2006 and 2005. 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 collectability of
trade receivables. Creditworthiness of customers is periodically reviewed to help gauge collectability. If events or changes in circumstances
indicate that specific receivable balances may be impaired, further consideration is given to the collectability 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:
39
(In Thousands)
Balance at
Beginning
of Year
Charged to
Costs and
Expenses
Deductions*
Balance at
End of
Year
Allowance for doubtful accounts:
2007
$
3,726
$
8,388
$
(7,624
)
$
4,490
2006
3,977
1,292
(1,543
)
3,726
2005
3,252
1,782
(1,057
)
3,977
*
Deductions represent amounts written off against the allowance, net of recoveries.