Nautilus 2012 Annual Report Download - page 31

Table of Contents
Due to uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits at December 31, 2012 , we are
unable to make reasonably reliable estimates of the timing of any cash settlements with the respective taxing authorities. Therefore,
approximately $4.1 million of unrecognized tax benefits, including interest and penalties on uncertain tax positions, have been excluded from the
contractual table above. For further information, refer to Note 11, Income Taxes, to our consolidated financial statements in Part II, Item 8 of this
report.
Off-Balance Sheet Arrangements
In the ordinary course of business, we enter into agreements that require us to indemnify counterparties against third-party claims. These may
include: agreements with vendors and suppliers, under which we may indemnify them against claims arising from our use of their products or
services; agreements with customers, under which we may indemnify them against claims arising from their use or sale of our products; real
estate and equipment leases, under which we may indemnify lessors against third party claims relating to the use of their property; agreements
with licensees or licensors, under which we may indemnify the licensee or licensor against claims arising from their use of our intellectual
property or our use of their intellectual property; and agreements with parties to debt arrangements, under which we may indemnify them against
claims relating to their participation in the transactions.
The nature and terms of these indemnifications vary from contract to contract, and generally a maximum obligation is not stated. We hold
insurance policies that mitigate potential losses arising from certain types of indemnifications. Because we are unable to estimate our potential
obligation, and because management does not expect these obligations to have a material adverse effect on our consolidated financial position,
results of operations or cash flows, no liabilities are recorded at December 31, 2012 .
Seasonality
We expect our sales from fitness equipment products to vary seasonally. Sales are typically strongest in the first and fourth quarters, followed by
the third quarter, and are generally weakest in the second quarter. We believe that various factors, such as the broadcast of network season
finales and seasonal weather patterns, influence television viewers and cause our advertising on cable television stations to be less effective in
the second quarter than in other periods. In addition, during the spring and summer months, consumers tend to be involved in outdoor activities,
including outdoor exercise, which impacts sales of indoor fitness equipment. This seasonality can have a significant effect on our inventory
levels, working capital needs and resource utilization.
NEW ACCOUNTING PRONOUNCEMENTS
In the first quarter of 2012, we adopted Accounting Standards Update No. 2011-5, Presentation of Comprehensive Income ("ASU 2011-05"),
which revises the manner in which entities present comprehensive income in their financial statements. ASU 2011-05 amendments are effective
for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of ASU 2011-05 did not have any
effect on our financial position, results of operations or cash flows.
In July 2012, the Financial Accounting Standards Board ("FASB") issued ASU 2012-02, Testing Indefinite-Lived Intangible Assets for
Impairment
("ASU 2012-02"), which amends the guidance in Accounting Standards Topic 350-30, Intangibles - Goodwill and Other, on testing
indefinite-lived intangible assets, other than goodwill, for impairment. Under ASU 2012-02, entities testing indefinite-lived intangible assets for
impairment would have the option of performing a qualitative assessment before calculating the fair value of the asset. If an entity determines,
on the basis of qualitative factors, that the indefinite-lived intangible asset is not more likely than not impaired, a quantitative fair value
calculation would not be needed. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning
after September 15, 2012, although early adoption is permitted. The adoption of ASU 2012-02 will not affect our financial position, results of
operations or cash flows.
In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income
("ASU 2013-02"). This ASU requires an entity to disclose additional information with respect to
changes in accumulated other comprehensive income (AOCI) balances by component. In addition, an entity is required to present, either on the
face of the financial statements or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income, but only
if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be
reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those
amounts. This ASU is effective for interim and annual periods beginning after December 15, 2012. Since ASU 2013-02 relates entirely to
disclosure, the adoption of this standard will not have any effect on our financial position, results of operations or cash flows.
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