Nautilus 2009 Annual Report Download - page 46

Table of Contents
approval of the disinterested members of the Company’s Board and is not anticipated until some time after the Company returns to profitability.
The obligation to reimburse Sherborne’s expenses is included as a long-term liability in the Company’s consolidated balance sheets at
December 31, 2009 and 2008.
In February 2009, the disinterested members of the Company’s Board of Directors approved a separate agreement with Sherborne Investors
Management (“Sherborne Investors”) under which the Company is obligated to reimburse Sherborne Investors, $20,000 per month, for the use
of Sherborne’s New York office space and administrative, information technology and communications services to support the Company’
s Chief
Executive Officer. In 2009, Nautilus paid Sherborne Investors $220,000 in reimbursements under this agreement.
New accounting pronouncements
– No new accounting pronouncements had, or are reasonably likely to have, a material impact on the
Company’s consolidated financial position, results of operations or cash flows.
(2) DISCONTINUED OPERATIONS
Discontinued operations consist of the Company’s commercial business and its former fitness apparel business.
Commercial Business
In light of continuing operating losses in its commercial business and in order to focus exclusively on management of its direct and retail
consumer businesses, on September 25, 2009 the Company committed to a plan for the complete divestiture of its commercial business segment.
As a result of this action, the Company reported its commercial business as a discontinued operation, which qualified for held-for-sale
accounting treatment, in the third quarter of 2009. The results of the commercial business have been reclassified as discontinued operations in
the Company’s financial statements for all periods presented.
In 2009, in light of continuing declines in commercial real property values and changes in management’s expectations regarding revenue, the
Company tested the long-lived assets of its commercial business segment for impairment. As a result, the Company recognized pre-tax
impairment charges in the third quarter of 2009 related to real property and other intangible assets of $1.4 million and $1.6 million, respectively.
In addition, the Company recognized an estimated pre-tax disposal loss of $18.3 million in the third quarter of 2009 in connection with its
planned sale of the commercial business.
Subsequently, in the fourth quarter of 2009, management determined that the Company might realize greater value by selling its commercial
business in multiple asset groups involving several buyers, rather than as a single disposal group as originally was planned. In the quarter ended
December 31, 2009 the Company completed the sale of its StairMaster and Schwinn Fitness commercial product lines and recorded an $8.8
million adjustment to reduce the estimated pre-tax disposal loss related to the commercial business.
Following is the adjustment to previously reported amount of estimated pre-tax disposal loss, reflecting management’s decision in the fourth
quarter of 2009 to dispose of the business in multiple asset groups involving several buyers, rather than as a single disposal group as originally
was planned:
The amount of estimated loss recognized by the Company in connection with the disposal of commercial business assets reflects the carrying
values of the assets expected to be sold in excess of the estimated amount of
42
(In thousands, before income taxes)
2009
Estimated loss on sale of commercial discontinued operation, as of September 30, 2009
$
(18,331
)
Adjustment to expected proceeds
8,840
Estimated loss on sale of commercial discontinued operation, as of December 31, 2009
$
(9,491
)
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