Nutrisystem 2011 Annual Report Download - page 59

5. FIXED ASSETS
Fixed assets consist of the following:
December 31,
2011 2010
Furniture and fixtures ............................................. $ 5,709 $ 5,767
Computer hardware and software .................................... 45,246 41,298
Equipment ...................................................... 2,977 1,887
Leasehold improvements .......................................... 11,101 10,524
65,033 59,476
Accumulated depreciation ......................................... (35,262) (25,152)
$ 29,771 $ 34,324
Depreciation and amortization expense was $12,068, $11,773 and $11,177 in 2011, 2010 and 2009, respectively.
6. GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS
On July 1, 2008, the Company acquired certain assets of Power Chow, LLC (d/b/a NuKitchen) (“NuKitchen”), a
provider of freshly prepared meals designed to promote weight management and healthy living. The total
purchase price of $5,717 was allocated to identifiable intangible assets ($3,000) and goodwill ($2,717). As
further discussed in Note 12, NuKitchen has been treated as a discontinued operation in 2010 and 2009.
NuKitchen was closed in 2010.
During the fourth quarter of 2009, a goodwill impairment charge of $2,717 was recorded as a result of the
Company conducting its annual impairment test of goodwill. Additionally, the Company recorded an impairment
charge of $1,824 for identifiable intangible assets. The Company used a combination of income and market
based approaches to estimate the fair value. The impairment is classified in discontinued operations (see Note
12). The impairment charge primarily resulted from management’s determination that the resources needed to
grow a premium product in a down economy were unsustainable after conducting market tests during the fourth
quarter of 2009, particularly with respect to the higher-end consumer segment.
7. EQUITY INVESTMENT
On October 11, 2007, the Company purchased an approximately 27% fully diluted equity interest in Zero
Technologies, LLC (“Zero Water”), at a purchase price of $14,258. This investment was accounted for under the
equity method of accounting. In June 2009, the Company abandoned its interest in Zero Water as management
determined that the business was no longer aligned with the Company’s strategic direction. An equity and
impairment loss of $4,000 was recorded to write-off the remaining investment.
8. CREDIT FACILITY AND INTEREST RATE SWAPS
On December 5, 2011, the Company executed an amended and restated credit agreement with a group of lenders
that provides for a $100,000 unsecured revolving credit facility with an expansion feature, subject to certain
conditions, to increase the facility to $180,000 (the “Credit Facility”). The Credit Facility replaced the $200,000
facility that was expiring in October 2012. The Company borrowed $30,000 million against the Credit Facility
during 2011 which was used to repay amounts outstanding under the old facility. As of December 31, 2011, the
Company had $30,000 in borrowings outstanding under the Credit Facility at a weighted average interest rate of
1.26%.
The Credit Facility provides for interest at either a floating rate, which will be a base rate, or a Eurocurrency rate
equal to LIBOR for the relevant term, plus an applicable margin. The base rate will be the higher of the lender’s
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