Nautilus 2009 Annual Report Download - page 50

Table of Contents
At December 31, 2009 and 2008, the Company recorded inventory valuation allowances of $0.7 million and $6.7 million, respectively, related to
excess parts and finished goods inventories. The reduction in inventory valuation allowances primarily results from the reclassification of certain
inventories to assets held-for-sale at December 31, 2009.
(6) PROPERTY, PLANT AND EQUIPMENT
Depreciation expense was $7.1 million and $9.8 million in 2009 and 2008, respectively.
On June 30, 2009, the Company terminated the lease for its world headquarters facility located in Vancouver, Washington and entered into a
new lease agreement to occupy substantially less space in the same building. As a result of the downsizing, the Company abandoned certain
leasehold improvements and recorded a related charge of $8.0 million in 2009, included as a component of restructuring expense (see Note 3 –
Restructuring).
(7) GOODWILL
Nautilus 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. 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 the
reporting units relating to continuing operations are its direct and retail business segments.
Our estimates of reporting 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, if necessary, 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 reporting
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.
46
(In thousands)
Estimated
Useful Life
(in years)
December 31,
2009
2008
Land
N/A
$
—
$
324
Buildings
5 to 20
—
7,017
Leasehold improvements
5 to 20
2,767
13,704
Computer equipment
2 to 5
41,225
42,623
Machinery and equipment
3 to 5
8,393
26,621
Furniture and fixtures
5
2,573
3,566
Construction in process
N/A
554
1,530
Total cost
55,512
95,385
Accumulated depreciation
(47,470
)
(62,502
)
$
8,042
$
32,883