Nutrisystem 2003 Annual Report Download - page 39

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37
As a result of a determination made in December 2000, the Company discontinued sales of the Sweet Success product
line by June 30, 2001. The results of the Sweet Success product line have been reported separately as a discontinued
operation in the Companys consolidated financial statements. Under the Companys ownership in 2000, Sweet Success
generated sales of $4,215 and incurred an operating loss of $713. The Company recorded a loss on disposal of $7,873, of
which $7,650 related to the write down of intangible assets and the remaining $223 related to various shut down costs. In
2001, Sweet Success generated sales of $3,350 and operating income of $813. Except for the sale of intellectual property
(see below), Sweet Success was inactive in 2002.
In December 2002, the Company sold the intellectual property associated with Sweet Success for $150 cash, a $50
promissory note due, deferred payments based on sales achieved by the buyer and a warrant to purchase equity of the
buyer. The Company recorded a gain of $200 from the transaction. The deferred payments and value of the warrant are
not expected to provide significant economic benefit to the Company, if any.
4. FIXED ASSETS
Fixed assets consist of the following:
December 31
-----------------------------------
2003 2002
Furniture and fixtures $ 162 $ 172
Equipment 1,220 1,316
Leasehold improvements 384 124
1,766 1,612
Accumulated depreciation (1,013) (1,012)
$ 753 $ 600
Depreciation expense was $223, $336 and $325 in 2003, 2002 and 2001, respectively.
5. OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
December 31
------------------------------------
2003 2002
Accrued packaging costs
$
274
$
Severance accrual 246 241
Legal accrual
235
Compensation 85
Liabilities of discontinued operation
56
Indemnifications of Imagine Weight Loss Center 52
Other 5 8
$ 662 $ 540
The accrued packaging costs represents remaining payments related to the costs associated with the development of new
packaging as well as any remaining packaging that has been discontinued due to the introduction of the new product line.
The severance accrual represents the current portion of future payments to a former executive of the Company, while the
compensation liability represents the value of common stock granted to the Board of Directors at December 31, 2003 but
the stock was not yet issued. The legal accrual represents the estimated attorney fees and settlement costs associated with