Nutrisystem 2006 Annual Report Download - page 54

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5. FIXED A
SS
ET
S
F
i
xe
d
assets cons
i
st o
f
t
h
e
f
o
ll
ow
i
ng:
December
31,
2006
200
5
F
u
rni
tu
r
ea
n
d
fix
tu
r
es
...............................................
$
1,924 $ 94
3
Computer
h
ar
d
ware an
d
so
f
twar
e
.
...................................
.
5
,
205 2
,
59
3
Equ
i
pment
.......................................................
3,975 2,95
7
Leasehold im
p
rovement
s
............................................
2,328 1,366
13,432 7,8
5
9
A
ccumulated de
p
reciation
.
.........................................
.
(
4,0
5
8) (1,8
5
7)
$ 9,374 $ 6,00
2
D
epreciation expense was
$
2,483,
$
719 and
$
259 in 2006, 2005 and 2004, respectively
.
6
. IDENTIFIABLE INTANGIBLE A
SS
ET
S
Th
e Compan
y
recor
d
e
d
t
h
e
f
o
ll
ow
i
n
gid
ent
ifi
a
bl
e
i
ntan
gibl
e assets
i
n connect
i
on w
i
t
h
t
h
e acqu
i
s
i
t
i
on o
f
Slim and Tone.
December 31, 2006
D
ecember 31, 200
5
W
ei
g
hted
A
vera
ge
P
er
i
o
d
G
ros
s
A
ccumulate
d
A
mort
i
zat
i
o
n
N
et
G
ros
s
A
ccumulated
A
mort
i
zat
i
o
n
N
e
t
Amort
i
za
bl
e
i
ntan
gibl
e asset
s
Customer relationshi
p
s
.
....... 6.0
y
ears $ 580 $388 $192 $ 580 $185 $ 39
5
P
roce
d
ures manua
l
s
.
.......... 1.
5
y
ears 120 120 — 120 8
6
3
4
C
ovenant not to com
p
ete.......
2
.
0
y
ears
44
—
42 2
704 512 1
9
2 704 273 431
Non-amortizable intan
g
ible asset
s
T
rade name/trademark
.
.......
5
9
5
—
5
9
5
920 — 920
Tota
l
..........................
$1,299 $512 $787 $1,624 $273 $1,351
Th
e
id
ent
ifi
a
bl
e
i
ntang
ibl
e assets are amort
i
ze
d
over t
h
ea
b
ove note
d
per
i
o
d
s on a stra
i
g
h
t
li
ne
b
as
i
sot
h
e
r
than customer relationships, which is amortized based on the estimated timin
g
of the value obtained (unde
r
which the majority of the amortization expense has been recognized in the first two years of service). In 2006
,
the Company recognized additional expense of
$
398 for the reduction in the carrying value of the custome
r
relationships and trade name/trademark as the Slim and Tone franchises have suffered a decline in pro
j
ected
f
uture revenues compared to original estimates. These charges were recorded to depreciation and amortization in
t
h
e accompany
i
ng conso
lid
ate
d
statement o
f
operat
i
ons. T
h
ea
ddi
t
i
ona
l
expense recor
d
e
df
or t
h
e customer
relationships of $73 decreased the wei
g
hted avera
g
e life from 10
y
ears to six
y
ears. Amortization expense fo
r
2006, 2005 and 2004 (for the period from the acquisition date through December 31, 2005) was
$
564,
$
264 and
$
9, respectively. Estimated amortization expense for the remaining amortizable intangible assets is not material.
7
. NOTE PAYABLE AND CAPITAL LEA
S
E OBLIGATIO
N
I
n connection with the acquisition of Slim and Tone, the Compan
y
issued a $450 note pa
y
able to the seller.
T
he seller note bears no interest and, as such, has been recorded net of a discount of $43 com
p
uted at a 5.2%
interest rate. Amortization of the note discount was
$
14 and
$
23 in 2006 and 2005, respectively, and
$
1 from the
48