Nautilus 2005 Annual Report Download - page 37

Table of Contents
$4.4 million and $0.9 million, net of imputed interest. The $4.4 million note requires payment of $300,000 in February 2006, and $150,000 per
quarter beginning March 2007 through December 2016. The $0.9 million note requires payments of $150,000 per quarter beginning September
2005 through December 2006.
We believe our existing cash and cash equivalents balances, cash generated from operations and borrowings available under our lines of
credit, will be sufficient to meet our working capital, stock repurchase, dividend and debt requirements for at least the next 12 months.
The Company’s contractual obligations and commercial commitments (as defined in Item 303(a)(5) of Regulation S-K under the
Securities Exchange Act of 1934) as of December 31, 2005 are as follows:
Due to the majority of our inventory being sourced from Asia, the Company has long lead times for inventory purchases and needs to
secure factory capacity from our vendors in advance. As a result, approximately $66.3 million of the $68.3 million in purchase obligations is
for inventory purchases. This inventory is predominately related to anticipated sales in the first half of 2006.
OFF-BALANCE SHEET ARRANGEMENTS
(In Thousands)
Payments due by period
Total
Less than 1
year 1-
3 years
3-
5 years
More than 5
years
Long
-
term debt obligations
$
6,273
707
478
2,080
3,008
Capital lease obligations
37
20
17
—
—
Operating lease obligations
33,960
5,439
10,383
7,409
10,729
Purchase obligations
68,323
66,176
2,147
—
—
Other long
-
term liabilities *
200
200
—
—
—
Total
$
108,793
$
72,542
$
13,025
$
9,489
$
13,737
* Certain contractual obligations and commercial commitments are excluded from this table because they require imprecise measurement or
are of a contingent nature (e.g., off
-
balance sheet arrangements described below).
From time to time, we arrange for leases or other financing sources with third parties to enable certain of our commercial customers to
purchase our equipment. While most of these financings are without recourse, in certain cases we may offer a guaranty or other recourse
provisions. The purpose of these guaranties is to increase our selling opportunities to commercial customers that would not otherwise be able to
obtain financing to purchase our equipment. At December 31, 2005 and 2004, the maximum contingent liability under all recourse provisions
was approximately $4.1 million and $4.4 million, respectively. Refer to Note 1 of the Notes to Consolidated Financial Statements for further
discussion of the accounting treatment for these arrangements. We expect an increase in these types of arrangements going forward.
INFLATION AND PRICE CHANGES
Although we cannot accurately anticipate the effect of inflation on our operations, with the exception of steel and fuel prices discussed
below, we do not believe that inflation has had, or is likely in the foreseeable future to have, a material adverse effect on our financial position,
results of operations or cash flows. However, increases in inflation over historical levels or uncertainty in the general economy could decrease
discretionary consumer spending for products like ours.
During 2004, we experienced increases in the price of steel, a major component of our products, and during 2005 we experienced
increases in distributions costs as the result of an increase in the price of fuel. To the extent these costs continue to increase, our gross margins
in 2006 may continue to be negatively impacted. Effective August 1, 2005, we implemented a transportation surcharge passing some of the
cost increases to the end consumer.
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