2. Accounting Policies
Estimates - The preparation of financial
statements in conformity with accounting principles generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most
sensitive and significant accounting estimates relate to customer rebates, valuation allowances for deferred income tax assets,
obsolete and slow-moving inventories, potentially uncollectible accounts receivable, pension liability and accruals for income
taxes. Actual results could differ from those estimates.
Principles of Consolidation - The consolidated
financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned by the Company. All
significant intercompany accounts and transactions are eliminated in consolidation.
Translation of Foreign Currency - For foreign
operations whose functional currencies are not U.S. dollars, assets and liabilities are translated at rates in effect at the end
of the year; revenues and expenses are translated at average rates in effect during the year. Resulting translation adjustments
are made directly to accumulated other comprehensive loss. Foreign currency transaction gains and losses are recognized in operating
results. Foreign currency transaction losses, which are included in other expense, net, were $88,125 in 2013 and $141,882 in 2012.
Cash Equivalents - Investments with an original
maturity of three months or less, as well as time deposits and certificates of deposit that are readily redeemable at the date
of purchase, are considered cash equivalents.
Accounts Receivable - Accounts receivable are shown less an
allowance for doubtful accounts of $227,891 at December 31, 2013 and $212,732 at December 31, 2012.
Inventories - Inventories are stated at the lower of cost,
determined by the first-in, first-out method, or market.
Property, Plant and Equipment and Depreciation – Property,
plant and equipment is recorded at cost. Depreciation is computed by the straight-line method over the estimated useful lives
of the assets, which range from 3 to 30 years.
Intangible Assets– Intangible assets
with finite useful lives are recorded at cost upon acquisition, and amortized over the term of the related contract or useful
life, as applicable. Intangible assets held by the Company with finite useful lives include patents and trademarks. Patents and
trademarks are amortized over their estimated useful lives. The weighted average amortization period for intangible assets at
December 31, 2013 was 14 years. The Company periodically reviews the values recorded for
intangible assets to assess recoverability from future operations whenever events or changes in circumstances indicate that their
carrying amounts may not be recoverable. At December 31, 2013 and 2012, the Company assessed the recoverability of its
long-lived assets and believed that there were no events or circumstances present that would that would require a test of recoverability
on those assets. As a result, there was no impairment of the carrying amounts of such assets and no reduction in their estimated
useful lives.
Deferred Income Taxes - Deferred income taxes are provided
for the differences between the financial statement and tax bases of assets and liabilities, and on operating loss carryovers,
using tax rates in effect in years in which the differences are expected to reverse.
Revenue Recognition – The
Company recognizes revenue from the sales of its products when ownership transfers to the customers, which
occurs either at the time of shipment or upon delivery based upon contractual terms with the customer. The
Company recognizes customer program costs, including rebates, cooperative advertising, slotting fees and other sales related discounts,
as a reduction to sales.
Research and Development – Research and development costs
($602,985 in 2013 and $572,985 in 2012) are expensed as incurred.
Shipping Costs – The costs of shipping
product to our customers ($3,244,487 in 2013 and $3,318,917 in 2012) are included in selling, general and administrative expenses.
Advertising Costs – The Company expenses the production
costs of advertising the first time that the related advertising takes place. Advertising costs ($1,484,782 in 2013 and $1,521,464
in 2012) are included in selling, general and administrative expenses.
Subsequent Events - The
Company has evaluated events and transactions subsequent to December 31, 2013 through the date the consolidated financial statements
were included in this Form 10-K and filed with the SEC.
Concentration – The Company performs ongoing credit evaluations
of its customers and generally does not require collateral for the extension of credit. Allowances for credit losses are provided
and have been within management's expectations. At December 31, 2013, with respect to concentration risk related to accounts receivable,
the Company had one customer that accounted for greater than 10% of total net receivables. In 2013 and 2012, the Company had two
customers that individually exceeded 10% of consolidated net sales. Net sales to these customers amounted
to approximately 16% and 15% in 2013 and approximately 17% and 12% in 2012.
Recently Issued Accounting Standards
In February 2013, the Financial Accounting Standards Board
(“FASB”) issued an accounting standards update on the reporting of amounts reclassified out of accumulated other comprehensive
income, to improve the transparency of reporting. These reclassifications present the effects on the line items of net income
of significant amounts reclassified out of accumulated other comprehensive income – but only if the item reclassified is
required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. The Company adopted this
standard for reporting periods beginning after December 15, 2012. The adoption of this accounting standard has not had an impact
on our consolidated financial statements.
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