Nautilus 2002 Annual Report Download - page 32

LIQUIDITY AND CAPITAL RESOURCES
Historically, we have financed our growth and acquisitions primarily from cash generated by our operating activities. During 2002, our
operating activities generated $100.6 million in net cash, which contributed to an aggregate $31.7 million balance in cash and cash equivalents
and $17.6 million of short-term investments, compared with $66.9 million and $52.8 million net cash generated by our operating activities in
2001 and 2000, respectively.
Net cash used in our investing activities decreased in 2002 to $57.9 million, from $94.3 million in 2001, which was up substantially from $8.7
million in 2000. The 2002 activity was primarily due to capital expenditures of $31.5 million and the acquisition of StairMaster for $24.1
million, net of cash acquired. The 2001 activity was primarily the acquisition of Schwinn Fitness for $69.8 million, including acquisition costs
and $16.1 million of net purchases of short-term investments. Our capital expenditures in 2002 primarily consisted of land and buildings,
manufacturing equipment, and computer systems and related equipment. We invested $16.7 million in capital expenditures for our direct
segment computer systems and related equipment to support the growth of the business. We purchased land and a building in Colorado for $6.7
million, including improvements, which serve as the commercial/retail segment headquarters. We also purchased land and buildings in Texas
and Virginia for $3.1 million, including improvements, which serve as manufacturing and warehouse facilities. We invested $2.3 million in
tooling for manufacturing our new products. We invested $1.7 million at our corporate headquarters in Washington to consolidate our
Washington operations and to expand our call center. Finally, we invested $1.5 million in 2002 for net purchases of short-term investments.
Net cash used in financing activities increased to $47.2 million from $14.0 million in 2001 and $2.6 million in 2000. Increased use of funds for
stock repurchases during 2002 and 2001 resulted in the increase in net cash used. In 2002 we repurchased $50.0 million of stock and received
$2.7 million for stock option exercises. In 2001 we repurchased $16.3 million of stock and received $2.3 million for stock option exercises.
Our working capital needs have increased as we continue to implement our growth strategy. Working capital in 2002, 2001 and 2000 was
$109.0 million, $84.4 million and $72.5 million, respectively. We anticipate that our working capital requirements will increase going forward
as a result of us growing our commercial/retail segment through our acquisition strategy and internal growth. We also expect to materially
increase our cash expenditures on spot commercials and infomercials as we expect advertising rates to remain higher than we experienced in the
first half of 2002 and as we expand the direct marketing campaigns for our Nautilus Sleep Systems and our newly introduced TreadClimber.
Commercial/retail segment inventories increased in anticipation of increased sales, especially of new products and the addition of inventories
associated with the acquisition of StairMaster. The $25.2 million increase in trade receivables can primarily be attributed to the fourth quarter
sales in 2002 being heavily back-end loaded as most of the 16 new retail products were received for sale late in the quarter. Also contributing to
the increase in receivables was the acquisition of StairMaster. We expect that our working capital will increase going forward as a result of our
anticipated future profitability.
We maintain a $10 million line of credit with U.S. Bank National Association. The line of credit is secured by certain assets and contains
several financial covenants. As of the date of this filing, we are in compliance with the covenants applicable to the line of credit, and there is no
outstanding balance under the line.
As of December 31, 2002, we had no contractual capital obligations or commercial commitments other than operating leases, which are
described in Note 8 of the Notes to Consolidated Financial Statements.
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