Nautilus 2015 Annual Report Download - page 40
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Please find page 40 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.NAUTILUS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Nautilus, Inc. and subsidiaries (collectively, "Nautilus" or the "Company") was founded in 1986 and incorporated in the State of Washington in 1993. Our
headquarters are located in Vancouver, Washington.
We are committed to providing innovative, quality solutions to help people achieve their fitness goals through a fit and healthy lifestyle. Our principal business
activities include designing, developing, sourcing and marketing high-quality cardio and strength fitness products and related accessories for consumer use,
primarily in the United States and Canada, but also in international markets outside North America. Our products are sold under some of the most-recognized
brand names in the fitness industry: Nautilus ® , Bowflex ® , Octane Fitness ® , Schwinn ® and Universal ® .
We market our products through two distinct distribution channels, Direct and Retail, which we consider to be separate business segments. Our Direct business
offers products directly to consumers through television advertising, catalogs and the Internet. Our Retail business offers our products through a network of
independent retail companies with stores and websites located in the United States and internationally. We also derive a portion of our revenue from the licensing
of our brands and intellectual property.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America (“U.S. GAAP”) and relate to Nautilus, Inc. and its subsidiaries, all of which are wholly-owned, directly or indirectly. Intercompany transactions and
balances have been eliminated in consolidation.
Discontinued Operations
Results from discontinued operations relate to the disposal of our former Commercial business, which began in 2009 and was completed in April 2011. We reached
substantial completion of asset liquidation at December 31, 2012. However, we continue to have legal and accounting expenses as we work with authorities on
final deregistration of each entity and product liability and other legal expenses associated with product previously sold into the Commercial channel.
Results of operations related to the Commercial business have been presented in the consolidated financial statements as discontinued operations for all periods
presented.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in the financial statements. Our most significant estimates relate
to the following:
• Revenue recognition, net of returns and allowances;
• Sales discounts and allowances;
•Allowance for uncollectible trade receivables;
• Valuation of excess and obsolete inventory;
• Goodwill and other long-term assets valuation;
• Product warranty obligations;
• Litigation and loss contingencies;
• Deferred tax assets and the related valuation allowance;
• Unrecognized tax benefits; and
• Valuation of assets and liabilities related to acquisition.
Actual results could differ from our estimates.
Concentrations
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents held in bank accounts in excess of
federally-insured limits and trade receivables. Trade receivables are generally unsecured and therefore collection is affected by the economic conditions in each of
our principal markets.
We rely on third-party contract manufacturers in Asia for substantially all of our products and for certain product engineering support. Business operations could
be disrupted by natural disasters, difficulties in transporting products from non-U.S. suppliers,
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