Nautilus 2015 Annual Report Download - page 41
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Please find page 41 of the 2015 Nautilus annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.as well as political, social or economic instability in the countries where contract manufacturers or their vendors or customers conduct business. While any such
contract manufacturing arrangement could be replaced over time, the temporary loss of the services of any primary contract manufacturer could delay product
shipments and cause a significant disruption in our operations.
We derive a significant portion of our net sales from a small number of our Retail customers. A loss of business from one or more of these large customers, if not
replaced with new business, would negatively affect our operating results and cash flows. In each of 2015 , 2014 and 2013 , one customer accounted for more than
10% , but less than 15% , of our net sales.
Cash and Cash Equivalents
All highly liquid investments with maturities of three months or less at purchase are considered to be cash equivalents. As of December 31, 2015 , cash equivalents
consisted of money market funds and corporate bonds and totaled $0.7 million . Our cash equivalents as of December 31, 2014 consisted of money market funds,
certificates of deposit, commercial paper, and variable-rate demand notes and totaled $24.1 million .
Available-For-Sale Securities
We classify our marketable securities as available-for-sale and, accordingly, record them at fair value. Marketable securities with original maturities of greater than
three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year may be
classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current
operations. Unrealized holding gains and losses, which are immaterial, are excluded from earnings and are reported net of tax in other comprehensive income until
realized. Dividend and interest income is recognized when earned. Realized gains and losses, which were not material in 2015 or 2014 , are included in earnings
and are derived using the specific identification method for determining the cost of securities sold.
We periodically evaluate whether declines in fair values of our investments below their cost are "other-than-temporary." This evaluation consists of qualitative and
quantitative factors regarding the severity and duration of the unrealized loss, as well as our ability and intent to hold the investment until a forecasted recovery
occurs.
For additional information, refer to Note 4, Fair Value Measurements .
Inventories
Inventories are stated at the lower of cost or market, with cost determined based on the first-in, first-out method. We establish inventory allowances for excess,
slow-moving and obsolete inventory based on inventory levels, expected product life and forecasted sales. Inventories are written down to market value based on
historical demand, competitive factors, changes in technology and product lifecycles.
Inventories acquired from Octane as of December 31, 2015 have been recorded at provisional fair values. For additional information, see Note 2, Business
Acquisition .
Property, Plant and Equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation. Improvements or betterments which add new functionality or significantly extend
the life of an asset are capitalized. Expenditures for maintenance and repairs are expensed as incurred. The cost of assets retired, or otherwise disposed of, and the
related accumulated depreciation, are removed from the accounts at the time of disposal. Gains and losses resulting from asset sales and dispositions are recognized
in the period in which assets are disposed. Depreciation is recognized, using the straight-line method, over the lesser of the estimated useful lives of the assets or, in
the case of leasehold improvements, the lease term, including renewal periods if we expect to exercise our renewal options. Depreciation on computer equipment,
machinery and equipment and furniture and fixtures is determined based on estimated useful lives, which generally range from three -to- seven years.
Property, plant and equipment acquired from Octane as of December 31, 2015 have been recorded at provisional fair values. For additional information, see Note
2, Business Acquisition .
Goodwill
Goodwill consists of the excess of acquisition costs over the fair values of net assets acquired in business combinations. We review goodwill for impairment in the
fourth quarter of each year and when events or changes in circumstances indicate that the carrying amount may be impaired. For this purpose, goodwill is
evaluated at the reporting unit level. Our goodwill asset related to our Canadian subsidiary is attributable to our Direct reporting unit, and our goodwill related to
the Octane acquisition is attributable to our Retail reporting unit. We performed an assessment of goodwill in the fourth quarters of 2015 , 2014 and 2013 and
concluded
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