Nautilus 2008 Annual Report Download - page 25

Table of Contents
We adopted the business segment model as part of a reorganization program implemented in the second quarter of 2008. Although our
reorganization plan has not been entirely implemented, and in spite of the present challenging economic environment, we are seeing benefits
from our efforts, particularly in terms of reduced operating expenses.
During 2008, we made a number of strategic decisions which impacted our operating results:
Global market and economic conditions have been, and continue to be, disruptive and volatile, and in recent months the volatility has reached
unprecedented levels. Concerns about the systemic impact of geopolitical issues, the availability and cost of credit, currency volatility, slowing
global economies, the United States mortgage market and a decline in the real estate market in the U.S. and elsewhere have contributed to
diminished expectations for the U.S. and world economies. These conditions, including declining business and consumer confidence and
increased unemployment, have contributed to reductions in consumer spending, particularly on discretionary products such as ours. During 2008,
we implemented cost reduction efforts to adjust for the decline in revenue; however, our restructuring and cost reduction efforts could only
partially offset the financial impact of the aforementioned factors on our revenue. We will continue to move forward with our restructuring and
cost reduction strategies. It is uncertain as to when the economy will recover, and it is not clear that our restructuring activities and cost reduction
initiatives will sufficiently offset the impact of the poor economic environment on our net sales.
Current economic conditions have led to greater than anticipated losses from operations, which have caused us to encounter difficulty in
maintaining the covenants under our revolving credit facility. Although we have been able to obtain waivers in the past, which have allowed us
to exclude certain items from the covenant calculations, we can provide no assurance that we will be able to obtain waivers in the future.
As a result of these challenges, we sustained significant operating losses during 2008 and 2007, contributing to a decrease in cash and net
working capital, and have had to rely on financing to fund our operations. If we continue to experience significant operating losses and
reductions in net working capital, we will need to obtain additional debt or equity financing to continue operating. If we are not able to raise
needed capital, we would be forced to sharply curtail our operations, including efforts to develop, manufacture and promote the sale of products.
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We restructured our workforce to better match the requirements of the newly formed business segment organization;
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We closed our Tulsa commercial manufacturing facility and transferred operations to third party manufacturers in Asia and our
owned manufacturing facility in Independence, Virginia;
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We consolidated our U.S. distribution centers and aligned the products by segment to allow for more efficient product handling;
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We ceased direct business sales through our Australian subsidiary and closed those operations;
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We sold our apparel division, Dash America, Inc. d/b/a Pearl iZumi;
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We closed our Canadian call center and consolidated our call center operations in Vancouver, Washington to achieve better
economies of scale;
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We terminated a number of marketing arrangements to better align our spending with our revised operating plans;
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We reduced our revolving line of credit to a level better suited for our anticipated borrowing; and
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We exercised our right to terminate agreements to purchase the Land America manufacturing facility located in China.