Nautilus 2009 Annual Report Download - page 23

Table of Contents
Substantially all of our revenues are generated from product sales. Our net sales for the year ended December 31, 2009, were $189.3 million, a
decrease of $94.4 million, or 33.3%, as compared to net sales of $283.7 million in the prior year. The decline in net sales primarily was due to a
general decline in consumer spending on discretionary products and reduced availability of consumer financing.
Gross profit margin increased to 51.0% for the year ended December 31, 2009, compared to 47.9% in the prior year, primarily due to reduced
distribution costs resulting from the consolidation of our distribution centers, a decrease in shipping costs arising from a change in our primary
outbound freight carrier and a decrease in warranty costs.
Operating expenses for the year ended December 31, 2009 were $125.7 million, a decrease of $67.6 million, or 35.0%, as compared to operating
expenses of $193.3 million in the prior year. The decrease in operating expenses reflects the impact of management’s efforts to better align
spending with current and anticipated revenue levels through significant reductions in advertising expenses, employment costs and other
expenses. For the years ended December 31, 2009 and 2008, we incurred $14.2 million and $13.9 million, respectively, in expenses associated
with our restructuring initiatives. Operating expenses for the year ended December 31, 2009 include intangible asset impairment charges of $5.9
million. Operating expenses for the year ended December 31, 2008 include a goodwill impairment charge of $29.8 million.
We reported an income tax benefit from continuing operations of $10.9 million for the year ended December 31, 2009, compared to a benefit of
$5.9 million in the prior year.
RESULTS OF OPERATIONS
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions that
affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the
consolidated financial statements. An accounting estimate is considered to be critical if it meets both of the following criteria: (i) the estimate
requires assumptions about matters that are highly uncertain at the time the accounting estimate is made, and (ii) different estimates reasonably
could have been used, or changes in the estimate that are reasonably likely to occur from period to period may have a material impact on the
presentation of our financial condition, changes in financial condition or results of operations. Our critical accounting policies and estimates are
discussed below.
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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 acquire a manufacturing operation located in China.