Nautilus 2008 Annual Report Download - page 57

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Table of Contents
4. INVENTORIES
At December 31, 2008 and 2007, the Company recorded inventory valuation allowances of $6.7 million and $5.0
million, respectively, related to
excess parts and finished goods inventories.
5. PROPERTY, PLANT AND EQUIPMENT
Depreciation expense was $12.8 million, $13.0 million and $14.1 million, for the years ended December 31, 2008, 2007 and 2006, respectively.
6. GOODWILL
In accordance with SFAS No. 142, Goodwill and Other Intangible Assets , the Company applies a fair value-based impairment test to evaluate
the carrying value of goodwill annually, at October 31, and more frequently if certain events or circumstances indicate that an impairment loss
may have been incurred, on an interim basis. The analysis of potential impairment of goodwill is a two-step process. The first step requires us to
calculate an estimate of the fair value of the applicable reporting units. Reporting units are defined as operating segments or one level below an
operating segment when that component constitutes a business for which discrete financial information is available and segment management
regularly reviews the operating results of that component. The Company has determined its reporting units are the direct, retail, and commercial
businesses and its corporate function.
Our estimates of business unit fair values are generally based on an analysis of discounted cash flows for the reporting unit and, when
appropriate, an analysis of comparable market data. If under step one, the estimated fair value of the reporting unit is greater than its carrying
amount, there is no impairment. If the reporting unit’s carrying amount is greater than the estimated fair value, then a second step must be
completed to measure the amount of impairment, if any.
The second step involves the allocation of the estimated fair value of the reporting unit to all of the identifiable assets and liabilities of the unit
(including any unrecorded intangible assets). Any remaining, or unallocated, amounts reflect the implied fair value of the business unit’s
goodwill. To the extent the estimated implied fair value of the goodwill is less than its carrying value, an impairment loss is recognized for the
difference.
53
December 31,
(In thousands)
2008
2007
Finished goods
$
29,541
$
39,143
Work
-
in
-
process
1,147
1,261
Parts and components
5,834
8,422
Raw materials
7,280
10,084
$
43,802
$
58,910
Estimated
Useful Life
(in years)
December 31,
(In thousands)
2008
2007
Land
N/A
$
324
$
359
Buildings and improvements
5 to 31.5
20,721
20,451
Computer equipment
2 to 5
42,623
46,259
Machinery and equipment
3 to 5
26,621
28,031
Furniture and fixtures
5
3,566
4,423
Construction in process
N/A
1,530
2,441
Total cost
95,385
101,964
Accumulated depreciation
(62,502
)
(59,673
)
$
32,883
$
42,291