Nautilus 2008 Annual Report Download - page 34

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Table of Contents
Goodwill Impairment
As a result of a challenging economy and declines in retail segment revenues, we recorded a $29.8 million impairment loss in the fourth quarter
of 2008 related to retail segment goodwill.
Litigation Settlement
During 2007, the Company settled a lawsuit with ICON Health and Fitness, Inc., and as a result we received the rights to utilize a variety of
fitness equipment related patents and technologies. We recorded the $18.3 million value of the intangible assets in our balance sheet and
recorded an offsetting reduction in operating expenses as a result of the legal settlement.
Other Income (Expense)
Interest expense decreased to $1.8 million in 2008, compared to $5.0 million in 2007, as proceeds from the sale of the Company’
s fitness apparel
business were used to reduce borrowings.
During 2008, the Company recorded as other expense, foreign currency transaction losses totaling $3.7 million, compared to $1.2 million in
foreign currency transaction gains in 2007. The change between the two periods reflects the strengthening dollar in 2008.
Income Tax Expense (Benefit)
The provision for income tax expense from continuing operations was $4.3 million in 2008, compared to a tax benefit from continuing
operations of $26.2 million in 2007. During 2008, the Company recorded a valuation allowance of $36.0 million due to uncertainty regarding its
ability to realize certain deferred tax assets as a result of recent operating losses. Our effective tax rate in 2008 was negative 4.8%, compared to
36.4% in 2007. The change in our effective tax rate primarily reflects the impact of the valuation allowance adjustment in 2008.
Discontinued Operations
The Company sold the operations of its Pearl Izumi apparel business in April of 2008 and recorded the results as discontinued operations. During
2008, the Company recorded income from discontinued operations (net of tax) of $2.4 million compared to a loss from discontinued operations
(net of tax) of $9.8 million recorded during the prior year. The 2007 loss from discontinued operations includes an impairment charge of $13.2
million for the difference between the Pearl Izumi anticipated net sale proceeds and the book value of the net assets.
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