Nautilus 2009 Annual Report Download - page 62

Table of Contents
types of indemnifications. Management does not deem these obligations to be significant to our consolidated financial position, results of
operations or cash flows, and no related liabilities are recorded at December 31, 2009.
Issues Arising from China Sales Operation
In 2008, the Company recognized a $3.8 million charge, included in discontinued operations, due to uncertainties regarding access to, and future
recovery of, certain assets of its China sales operation. In 2009, the Company recovered a portion of these assets and, as a result of this and other
changes in circumstances, reduced the previously accrued loss amount by $2.3 million. At December 31, 2009 the Company had an allowance of
$1.5 million due to uncertainties regarding the future recovery of China trade receivables.
Legal Matters
The Company is party to various legal proceedings arising from normal business activities. In addition, the Company’s tax filings are subject to
audit by authorities in the jurisdictions where it conducts business, which may result in assessments of additional taxes. Management believes it
has adequately provided for obligations that would result from these legal and tax proceedings where it is probable it will pay some amounts and
the amounts can be reasonably estimated. In some cases, however, it is too early to predict a final outcome. Management believes that the
ultimate resolution of these matters will not have a material effect on the Company’s financial position, results of operations or cash flows.
(17) SUBSEQUENT EVENTS
In November 2009, the President signed into U.S. federal law a provision allowing taxpayers to carry back applicable net operating losses for a
period of up to five years. This new law allowed Nautilus to carry-back a portion of its 2008 net operating loss to prior years in which the
Company had paid federal taxes and, as a result, we received a U.S. income tax refund of approximately $12.1 million in January 2010.
On February 19, 2010, the Company completed an agreement for the sale of certain assets of its Nautilus
strength equipment product lines. The
buyer also acquired rights to certain patents, technologies and other intellectual property, assumed certain outstanding warranty obligations
related to the Company’s North American commercial products and entered into a short-term lease of its Independence, Virginia manufacturing
and warehousing facilities with an option to purchase such facilities.
On March 8, 2010, the Company entered into the New Loan Agreement with Bank of the West, providing for a $15.0 million revolving secured
credit line. The New Loan Agreement is available for working capital, standby letters of credit and general corporate purposes through
September 2012, assuming Nautilus satisfies certain terms and conditions at the time borrowings are requested.
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